JSC “Xalq Bank”
Consolidated financial statements and
independent auditor’s report
F o r the y e a r ended 31 D ecem ber 2021
Contents
Statement of management’s responsibilities for the preparation and approval of
the consolidated financial statements for the year ended 31 December 2021
Independent auditor’s report
Consolidated financial statements
Consolidated
Consolidated
Consolidated
Consolidated
statement
statement
statement
statement
of financial position.........................................................................................................................7
of comprehensive income............................................................................................................. 8
of changes in equity....................................................................................................................... 9
of cash flows..................................................................................................................................1°
Notes to the consolidated financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
Principal activities......................................................................................................................................................12
Basis of preparation................................................................................................................................................. 12
Summary of accounting policies.............................................................................................................................. 13
Significant accounting judgments and estimates................................................................................................... 25
Restatement and reclassifications...........................................................................................................................26
Cash and cash equivalents......................................................................................................................................30
Amounts due from credit institutions.......................................................................................................................30
Loans to custom ers................................................................................................................................................. 31
Investment securities................................................................................................................................................ 36
Property and equipment and intangible assets ........... .......................................................................................37
Taxation.....................................................................................................................................................................37
Credit loss expense and other impairment and provisions................................................................................... 39
Other assets and liabilities.......................................................................................................................................39
Amounts due to credit institutions...........................................................................................................................40
Amounts due to customers.......................................................................................................................................40
Other borrowed funds............................................................................................................................................... 42
Subordinated loans.................................................................................................................................................. 43
Equity.........................................................................................................................................................................43
Commitments and contingencies............................................................................................................................ 44
Net interest incom e.................................................................................................................................................. 45
Net fee and commission incom e............................................................................................................................. 46
Other income............................................................................................................................................................. 46
Personnel and other operating expenses............................................................................................................... 47
Risk management.................................................................................................................................................... 47
Fair value measurements.........................................................................................................................................59
Maturity analysis of assets and liabilities................................................................................................................ 62
Related party disclosures.........................................................................................................................................63
Subsidiaries............................................................................................................................................................... 65
Changes in liabilities arising from financing activities............................................................................................65
Capital adequacy......................................................................................................................................................65
Events after the reporting period............................................................................................................................. 66
S tatem ent of m anagem ent’s responsibilities for the preparation and approval of
the consolidated financial statem ents fo r the year ended 31 D ecem ber 2021
Management is responsible for the preparation of the consolidated financial statements that present fairly the financial
position of Joint Stock Commercial “Xalq Bank” and its subsidiaries (together referred to as “the Group”) as at 31
December 2021 and the results of its operations, cashflows and changes in shareholders’ equity for the year then ended,
in compliance with International Financial Reporting Standards (“IFRS”).
In preparing the consolidated financial statements, management is responsible for:
►
Properly selecting and applying accounting policies;
►
Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information;
►
Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the Group’s
consolidated financial position and financial performance; and
►
Making an assessment of the Group’s ability to continue as a going concern.
Management is also responsible for:
►
Designing, implementing and maintaining an effective and sound system of internal controls, throughout the
Group;
►
Maintaining adequate accounting records that are sufficient to show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the consolidated statement of financial position of the Group, and
which enable them to ensure that the consolidated financial statements of the Group comply with IFRS;
►
Maintaining statutory accounting records in compliance with legislation and accounting policies of the Republic of
Uzbekistan;
►
Taking such steps as are reasonably available to them to safeguard the assets of the Group; and
►
Preventing and detecting fraud and other irregularities.
The consolidated financial statements of the Group for the year ended 31 December 2021 were approved by the
management on 15 September 2022.
On behalf of the Management:
Shuhrat Atabaev
Chairman of the Management Board
Kiyomiddin Shemazarov
Chief Accountant
A
f),
15 September 2022
EY
Building a better
working world
FE Audit company
Ernst & Young LLC
Inconel Business Center, 3rd floor
Mustaqillik Prospect, 75
Tashkent, 100000
Republic of Uzbekistan
Tel: +998 (78) 140 6482
Fax: +998 (78) 140 6483
www,ey.com/uz
MChJ “Ernst & Young" XK
Auditorlik Tashkiloti
O'zbekiston Respublikasi,
100000, Toshkent shahar,
Mustaqillik shox ko'chasi, 75
Inkonel Biznes Markazi,
3-qavat
Tel: +998 (78) 140 6482
Faks: +998 (78)140 6483
ИП ООО «Ernst & Young»
Аудиторская Организация
Республика Узбекистан
100000, Ташкент
Пр-т Мустакиллик, 75
Бизнес-центр «Инконель»,
3 этаж
Тел.: +998 (78) 140 6482
Факс: +998 (78) 140 6483
Independent auditor's report
To the Shareholders and Supervisory Board of Jo int-Stock Commercial "Xalq Bank
Opinion
We have audited the consolidated financial statements of Joint-Stock Commercial "Xalq Bank"
and its subsidiaries (hereinafter, the "G roup” ), which comprise the consolidated statem ent of
financial position as at 31 December 2 0 2 1 , and the consolidated statem ent of comprehensive
income, consolidated statem ent of changes in equity and consolidated statem ent of cash flows for
the year then ended, and notes to the consolidated financial statements, including a sum m ary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at 31 December 2 0 2 1 and its
consolidated financial perform ance and its consolidated cash flows fo r the year then ended in
accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are f u r th e r described in the A u d ito r's responsibilities
fo r the a u d it o f the consolidated financial statem ents section of our report. We are independent of
the Group in accordance with the International Ethics Standards Board fo r Accountants' (IESBA)
International Code of Ethics fo r Professional Accountants (including International Independence
Standards) (IESBA Code) to g e th e r with the ethical requirem ents th a t are relevant to our audit of
the consolidated financial statem ents in the Republic of Uzbekistan, and we have fulfilled our
o th e r ethical responsibilities in accordance with these requirements and the IESBA Code. We
believe th a t the audit evidence we have obtained is sufficient and appropriate to provide a basis
fo r our opinion.
EY
Building a better
working world
Other m a tte r
The consolidated financial statem ents of the Group fo r the year ended 31 December 2 0 2 0
were audited by ano the r a u d ito r who expressed an unm odified opinion on those statem ents on
16 J u ly 2 0 2 1 .
Responsibilities of management and the Supervisory Board for the consolidated financial
statem ents
Management is responsible fo r the preparation arid fair presentation of the consolidated
financial statements in accordance w ith IFRSs, and fo r such internal control as management
determines is necessary to enable the preparation of consolidated financial statements th a t are
free fro m material misstatement, w h e th e r due to fraud or error.
In preparing the consolidated financial statements, management is responsible fo r assessing
the Group's ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless management either
intends to liguidate the Group or to cease operations, or has no realistic alternative but to do
so.
The Supervisory Board is responsible fo r overseeing the Group's financial reporting process.
Auditor's responsibilities for the audit of the consolidated financial statem ents
Our objectives are to obtain reasonable assurance about w he th e r the consolidated financial
statem ents as a whole are free fro m material misstatement, w hether due to fraud or error, and
to issue an auditor's report th a t includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee th a t an audit conducted in accordance with ISAs will always
detect a material m isstatem ent when it exists. Misstatements can arise from fraud or erro r and
are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance w ith ISAs, we exercise professional jud gm e n t and maintain
professional skepticism th ro u g h o u t the audit. We also:
►
Identify and assess the risks of material m isstatem ent of the consolidated financial
statem ents, w h e th e r due to fraud or error, design and perfo rm audit procedures
responsive to those risks, and obtain audit evidence th a t is sufficient and a ppropriate to
provide a basis fo r o ur opinion. The risk of not detecting a material m isstatem ent
resulting fro m fraud is higher than fo r one resulting fro m error, as fraud may involve
collusion, forgery, intentional omissions, m isrepresentations, or the override of internal
control.
►
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures th a t are a ppropriate in the circumstances, but not fo r the purpose of
expressing an opinion on the effectiveness of the Group's internal control.
►
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
EY
Building a better
working world
►
Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, w h e th e r a material u ncertainty
exists related to events or conditions th a t may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude th a t a material u ncertainty exists,
we are reguired to draw a tte n tio n in our auditor's re p o rt to the related disclosures in the
consolidated financial statem ents or, if such disclosures are inadeguate, to m odify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
a uditor's report. However, fu tu re events or conditions may cause the Group to cease to
continue as a going concern.
►
Evaluate the overall presentation, stru cture and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner tha t achieves fair
presentation.
►
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible fo r the direction, supervision and performance of
the group audit. We remain solely responsible fo r our audit opinion.
We communicate w ith the Supervisory Board regarding, among o ther matters, the planned
scope and tim ing of the audit and significant audit findings, including any significant
deficiencies in internal control th a t we identify during our audit.
The p artner in charge of the audit resulting in this independent auditor's re p ort is Anvar
Azamov.
Tashkent, Uzbekistan
15 September 2 0 2 2
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Foreign Enterprise A udit Company "E rnst & Y ou n g ^L L C
C ertificate authorizing audit of banks registered by the
Central Bank of the Republic of Uzbekistan Under # 11
dated 2 2 Ju ly 2 0 1 9
Anvarkhon Azamov
Qualified auditor
A u d ito r qualification ce rtifica te authorizing audit of
banks # 1 1 / 4 dated 11 May 2 0 1 7 issued by the Central
Bank of the Republic of Uzbekistan
Head of Uzbekistan practice
Foreign Enterprise Audit Company "E rnst & Y oung" LLC
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Consolidated statem ent of financial position
as at 31 D ecem ber 2021
(millions o f Uzbek soums)
As at 31 December
Notes
2021
2020 (Restated)*
As at 1 January
2020 (Restated)*
Assets
Cash and cash equivalents
Amounts due from credit institutions
Loans to customers
Investment securities
Current income tax assets
Property and equipment and intangible assets
Insurance assets
Deferred income tax assets
Other assets
6
7
8
9
10
11
13
Total assets
Liabilities
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Current income tax liabilities
Subordinated loans
Insurance liabilities
Other liabilities
Equity
Share capital
Accumulated deficit
Total equity
Total equity and liabilities
14
15
16
17
13
18
2,272,546
1,740,379
16,793,134
3,153,336
931,614
3,319
781,966
138,587
2,798,912
2,790,212
17,024,855
414,518
731,272
1,733
445,549
153,019
1,597,590
2,406,676
11,509,149
89,694
1,191
562,627
2,701
222,013
171,279
25,814,881
24,360,070
16,562,920
946,199
12,325,878
49,427
7,501,526
249,925
66,124
110,712
780,556
8,308,311
70,177
3,414,399
248,477
49,514
244,338
21,249,791
1,535,367
10,999,302
70,127
8,253,471
7,104
249,925
54,933
144,689
21,314,918
13,115,772
7,433,380
(2,868,290)
4,230,912
(1,185,760)
4,230,912
(783,764)
4,565,090
3,045,152
3,447,148
25,814,881
24,360,070
16,562,920
* Certain amounts shown here do not correspond to the consolidated financial statements for the years ended
31 December 2020 and 2019, as they reflect correction of certain errors and voluntary change in accounting policies,
Consolidated statem ent of com prehensive incom e
fo r the year ended 31 Decem ber 2021
(millions o f Uzbek Soums)
Notes
Interest income
Interest expense
20
20
Net interest income
Credit loss expense
Initial recognition adjustment on interest bearing assets
12
8
Net interest expense after credit loss expense
and initial recognition of financial instruments
Fee and commission income
Fee and commission expense
Net gains/(losses) from foreign currencies:
- dealing
- translation differences
Dividend income
Other income
Other impairment and provisions
Income from insurance activities
Expenses incurred from insurance activities
Personnel and other operating expenses
21
21
22
23
Net non-interest expense
Loss before income tax expense
Income tax benefit
Loss for the year
11
2020 (Restated)*
2021
3,450,482
(2,067,378)
2,917,232
(1,424,058)
1,383,104
1,493,174
(2,448,147)
(18,967)
(1,583,730)
(52,921)
(1,084,010)
(143,477)
1,025,834
(360,349)
807,847
(257,868)
46,641
5,649
1,683
103,649
(5,933)
5,034
(22,059)
(1,311,536)
21,857
(57,175)
1,465
95,672
(3,562)
15,629
(20,169)
(1,071,205)
(511,387)
(467,509)
(1,595,397)
(610,986)
317,942
208,990
(1,277,455)
(401,996)
Other comprehensive income/(loss)
Total comprehensive loss for the year
-
(1,277,455)
(401,996)
Certain amounts shown here do not correspond to the consolidated financial statements for the years ended
31 December 2020, as they reflect correction of certain errors and voluntary change in accounting policies, as detailed
in Note 5.
Signed and authorised for release on behalf of the Management Board q the Bai
bl
Shuhrat Atabayev
Kiyomiddin Shernazarov
t Board
Chief Accountant
15 September 2022
The accompanying notes on the pages 12 to 66 are an integral part of these consolidated financial statements
C onsolidated statem ent of changes in equity
for the year ended 31 D ecem ber 2021
(millions of Uzbek Soums)
Notes
Balance at 1 January 2020
Adjustment on correction of error
Share capital
Total equity
(63,449)
155
4,171,140
(3,522)
(720,315)
(155)
(723,992)
4,230,912
(783,764)
-
3,447,148
_
(401,996)
4,230,912
(1,185,760)
Loss for the year (restated)*
Balance at 31 December 2020 (restated)*
Other reserves
4,234,434
5
As at 1 January 2020 (restated)*
Accumulated deficit
_
Loss for the year
(401,996)
-
(1,277,455)
3,045,152
(1,249,121)
Issuance of share capital
18
2,797,393
Capitalization of dividends
18
405,075
(405,075)
-
.
7,433,380
(2,868,290)
-
4,565,090
Balance at 31 December 2021
2,797,393
Certain amounts shown here do not correspond to the consolidated financial statements for the years ended 31 December 2020 and 2019, as they reflect c ^ S ro tF Q fs e rta in errors and
voluntary change in accounting policies, as detailed in Note 5.
Signed and authorised for release on behalf of the Management Board of the Bank
Shuhrat Atabayev
oard
Kiyomiddin Shernazarov
15 September 2022
The accompanying notes on the pages 12 to 66 are an integral part of these consolidated financial statements
9
C onsolidated statem ent o f cash flow s
for the year ended 31 D ecem ber 2021
(millions of Uzbek Soums)
Notes
Cash flows from operating activities
Loss before income tax
2021
2020 Restated*
(1,595,397)
(610,986)
Adjustm ents for:
Provision for impairment losses on interest bearing assets
12
2,448,147
1,583,730
Other impairment and provisions
13
5,933
3,562
Initial recognition adjustment on interest bearing assets
8
18,967
52,921
72,404
40,734
115,669
(240,018)
83,481
(899,326)
Net unrealized loss on foreign exchange operations
Depreciation and amortization
Change in interest income accrual
Change in interest expenses accrual
Cash flows from operating activities before
changes in operating assets and liabilities
10
(141,803)
78,171
683,902
332,287
1,053,401
(1,902,652)
(1,586)
6,425
(373,943)
(5,748,175)
968
6,492
(602,895)
1,400,835
11,191
40,079
750,036
2,495,156
5,419
(98,275)
688,700
(2,629,035)
N et (increase)Zdecrease in operating assets
Amounts due from credit institutions
Loans to customers
Insurance assets
Other assets
N et increase/(decrease) in operating liabilities
Amounts due to credit institutions
Amounts due to customers
Insurance liabilities
Other liabilities
Net cash flows from (used in) operating activities before
income tax
Income tax paid
(25,579)
(6,251)
Net cash flows from (used in) operating activities
663,121
(2,635,286)
* Certain amounts shown here do not correspond to the consolidated financial statements for the years ended 31
December 2020, as they reflect correction of certain errors, as detailed in Note 5.
Consolidated statem ent of cash flow s
for the year ended 31 Decem ber 2021
(millions of Uzbek Soums)
Notes
2021
2020 Restated*
Cash flows from investing activities
Purchase of investment securities
Proceeds from redemption of investment securities
Purchase of property and equipment
Proceeds from sale of property and equipment
(5,419,060)
2,670,808
(320,597)
4,586
(871,488)
548,019
(271,796)
19,670
Net cash used in investing activities
(3,064,263)
(575,595)
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from issue of debt securities
Redemption of debt securities issued
18
29
29
2,716,532
340,000
(360,700)
5,053,550
(5,053,600)
Proceeds from other borrowed funds
Repayment of other borrowed funds
29
29
4,058,501
(4,858,207)
5,573,828
(1,152,773)
1,896,126
4,421,005
(2,134)
(4,516)
(19,216)
(526,366)
(4,286)
1,201,322
Net cash from financing activities
Effect of changes in foreign exchange rates on cash and cash
equivalents
Effect of expected credit losses on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
12
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
6
Interest received
Interest paid
Non-cash dividend capitalization
18
-
2,798,912
1,597,590
2,272,546
2,798,912
3,246,175
2,209,181
2,016,127
1,345,887
80,862
-
* Certain amounts shown here do not correspond to the consolidated financial statements for the years ended 31
December 2020 and 2019, as they reflect correction of certain errors, as detailed in Note 5.
(millions of Uzbek Soums)
1.
Principal activities
The Joint Stock Commercial Xalq Bank (the “Bank”) is the parent company in the Group which includes two subsidiaries,
Xalq sugurta LLC and Uzpaynet JV LLC. State Commercial Xalq Bank was formed by the Decree of the Government of
the Republic of Uzbekistan dated October 4, 1995. Based on the Decree of the President of the Republic of Uzbekistan
No. PD-4720 dated April 24, 2015 “On measures to introduce modern methods of corporate governance in joint-stock
companies”, the name of the Bank was renamed to “Xaiq bank”.
The Bank is the only bank in Uzbekistan that has the right to receive, accumulate and manage the funds of the
accumulative pension fund (APF) of individuals in accordance with the Law of the Republic of Uzbekistan No. 702-II “On
the accumulative pension fund” dated December 2, 2004.
The Bank provides services to the Government of the Republic of Uzbekistan, accepts deposits from the public and
extends credit, transfers payments in the Republic of Uzbekistan and abroad, exchanges currencies and provides other
banking services to its commercial and retail customers. Its main office is in Tashkent and it has 196 branches in the
Republic of Uzbekistan. The Bank’s registered legal address is Katartol street 46, Chilanzar district, Tashkent.
The Bank participates in the state deposit insurance program. The State Deposit Insurance Fund guarantees repayment
of 100% of deposits of individuals in case of business failure and revocation of the Central Bank of the Republic of
Uzbekistan (the “CBU”) banking license.
The Bank has the right to conduct lottery programs in accordance with license №1 issued by the Ministry of Finance of
the Republic of Uzbekistan dated 28 June 2019.
As of 31 December, the following shareholders owned the issued shares of the Bank:
Shareholder__________________________________________________________ 2021, %___________ 2020, %
The Fund for Reconstruction and Development of the Republic of Uzbekistan
The Ministry of Finance of the Republic of Uzbekistan
Total
77.58
70.10
22.42
___________ 29.90
100
100
The ultimate shareholder and controlling party of the Bank is the Government of the Republic of Uzbekistan.
These consolidated financial statements were authorized for issue by the Management Board of the Group on 15
September 2022.
2.
Basis of preparation
General
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”).
These consolidated financial statements have been prepared on the assumption that the Group is a going concern and
will continue in operation for the foreseeable future.
The Group maintains its accounting records in accordance with the respective laws of the Republic of Uzbekistan. These
consolidated financial statements have been prepared from statutory accounting records and have been adjusted to
conform to IFRS. These adjustments include certain reclassifications to reflect the economic substance of underlying
transactions including reclassification of certain assets and liabilities, income and expenses to appropriate financial
statement caption.
The consolidated financial statements have been prepared under the historical cost convention except as disclosed in
the accounting policies below. For example, investment securities have been measured at fair value.
These consolidated financial statements are presented in millions of Uzbek Soums (“UZS”), except per share amounts
and unless otherwise indicated.
The Group presents its consolidated statement of financial position broadly in order of liquidity. An analysis regarding
recovery or settlement within 12 months after the statement of financial position date (current) and more than 12 months
after the statement of financial position date (non-current) is presented in Note 26.
(millions of Uzbek Soums)
3.
S um m ary of accounting policies
Changes in accounting policies
The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning
on or after 1 January 2021. The Group has not early adopted any standards, interpretations or amendments that have
been issued but are not yet effective.
Interest Rate Benchmark Reform - Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (IBOR reform
Phase 2)
COVID-19-Related Rent Concessions beyond 30 June 2021 Amendments to IFRS 16
On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions - amendment to IFRS 16 Leases. The
amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent
concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect
not to assess whether a COVID-19 related rent concession from a lessor is a lease modification. A lessee that makes
this election accounts for any change in lease payments resulting from the COVID-19 related rent concession the same
way it would account for the change under IFRS 16, if the change were not a lease modification.
The amendment was intended to apply until 30 June 2021, but as the impact of the COVID-19 pandemic is continuing,
on 31 March 2021, the IASB extended the period of application of the practical expedient to 30 June 2022. The
amendment applies to annual reporting periods beginning on or after 1 April 2021. However, the Group has not received
COVID-19-related rent concessions, but plans to apply the practical expedient if it becomes applicable within allowed
period of application.
Basis of consolidation
Subsidiaries, which are those entities which are controlled by the Group, are consolidated. Control is achieved when
the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group
has:
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee;
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when
the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement(s) with the other vote holders of the investee;
Rights arising from other contractual arrangements;
The Group’s voting rights and potential voting rights.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated
from the date that control ceases. All intra-group transactions, balances and unrealized gains on transactions between
group companies are eliminated in full; unrealized losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries have been changed to
ensure consistency with the policies adopted by the Group.
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.
Losses are attributed to the non-controlling interests even if that results in a deficit balance.
If the Group loses control over a subsidiary, it derecognises the assets (including goodwill) and liabilities of the subsidiary,
the carrying amount of any non-controlling interests, the cumulative translation differences, recorded in equity;
recognises the fair value of the consideration received, the fair value of any investment retained and any surplus or deficit
in profit or loss and reclassifies the parent’s share of components previously recognised in other comprehensive income
to profit or loss.
(millions of Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Fair value measurement
The Group measures financial instruments carried at FVPL and FVOCI and non-financial assets such as investment
property, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability
is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that
market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into
account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within
the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly
or indirectly observable;
Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines
whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
(millions of Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Financial assets and liabilities
Initial recognition
Date o f recognition
All regular way purchases and sales of financial assets and liabilities are recognised on the trade date i.e. the date that
the Group commits to purchase the asset or liability. Regular way purchases or sales are purchases or sales of financial
assets and liabilities that require delivery of assets and liabilities within the period generally established by regulation or
convention in the marketplace.
Initial measurement
The classification of financial instruments at initial recognition depends on their contractual terms and the business model
for managing the instruments. Financial instruments are initially measured at their fair value and, except in the case of
financial assets and financial liabilities recorded at FVPL, transaction costs are added to, or subtracted from, this amount.
M easurem ent categories o f financial assets and liabilities
The Group classifies all of its financial assets based on the business model for managing the assets and the asset’s
contractual terms, measured at either:
Amortised cost;
FVOCI;
FVPL.
The Group classifies and measures its derivative and trading portfolio at FVPL. The Group may designate financial
instruments at FVPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVPL
when they are held for trading, are derivative instruments or the fair value designation is applied.
Am ounts due from credit institutions, loans to customers, investments securities at amortised cost
The Group only measures amounts due from credit institutions, loans to customers and other financial investments at
amortised cost if both of the following conditions are met:
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows;
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding (SPPI).
The details of these conditions are outlined below.
Business m odel assessm ent
The Group determines its business model at the level that best reflects how it manages groups of financial assets to
achieve its business objective.
The Group’s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated
portfolios and is based on observable factors such as:
How the performance of the business model and the financial assets held within that business model are evaluated and
reported to the entity’s key management personnel;
The risks that affect the performance of the business model (and the financial assets held within that business model)
and, in particular, the way those risks are managed;
How managers of the business are compensated (for example, whether the compensation is based on the fair value of
the assets managed or on the contractual cash flows collected);
The expected frequency, value and timing of sales are also important aspects of the Group’s assessment.
(millions of Uzbek Soums)
3.
Sum m ary o f accounting policies (continued)
Financial assets and liabilities (continued)
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’
scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Group’s original
expectations, the Group does not change the classification of the remaining financial assets held in that business model,
but incorporates such information when assessing newly originated or newly purchased financial assets going forward.
The SPPI test
As a second step of its classification process the Group assesses the contractual terms of financial asset to identify
whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change
over the life of the financial asset (for example, if there are repayments of principal or amortisation of
the premium/discount).
The most significant elements of interest within a lending arrangement are typically the consideration for the time value
of money and credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors
such as the currency in which the financial asset is denominated, and the period for which the interest rate is set.
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash
flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments
of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at
FVPL.
Financial guarantees, letters o f credit and undrawn loan commitments
The Group issues financial guarantees, letters of credit and loan commitments.
Financial guarantees are initially recognised in the financial statements at fair value, being the premium received.
Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amount
initially recognised less cumulative amortisation recognised in the consolidated statement of profit or loss, and an ECL
provision.
Undrawn loan commitments and letters of credits are commitments under which, over the duration of the commitment,
the Group is required to provide a loan with pre-specified terms to the customer. Similar to financial guarantee contracts,
these contracts are in the scope of the ECL requirements.
The Group occasionally issues loan commitments at below market interest rates drawdown. Such commitments are
initially recognised at fair value and subsequently measured at the higher of the amount of the ECL allowance and
the amount initially recognised less, when appropriate, the cumulative amount of income recognised.
Performance guarantees
Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obligation.
The risk under performance guarantee contracts is the possibility that the failure to perform the contractual obligation by
another party occurs.
Reclassification o f financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Group changes the business model for managing financial assets. Financial liabilities are
never reclassified. The Group did not reclassify any of its financial assets and liabilities in 2021.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, amounts due from the CBU, excluding obligatory reserves, and
amounts due from credit institutions that mature within ninety days of the date of origination and are free from contractual
encumbrances.
(millions of Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Obligatory reserves with the Central Banks
Obligatory reserves with the Central Banks represent the amount of mandatory reserves deposited with the Central
Banks of the Republic of Uzbekistan, which are not available to finance the Group’s day-to-day operations and hence
are not considered as part of cash and cash equivalents for the purposes of the consolidated statement of cash flows
and are presented within amount due from credit institutions in the consolidated statement of financial position.
Borrowings
Issued financial instruments or their components are classified as liabilities, where the substance of the contractual
arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or
to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number
of own equity instruments. Such instruments include amounts due to the Central bank, amounts due to credit institutions,
amounts due to customers, debt securities issued, other borrowed funds and subordinated loans. After initial recognition,
borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are
recognised in profit or loss when the borrowings are derecognised as well as through the amortization process.
If the Group purchases its own debt, it is removed from the consolidated statement of financial position and the difference
between the carrying amount of the liability and the consideration paid is recognised in profit or loss.
Leases
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases
of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing
the right to use the underlying assets.
Rjqht-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end
of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease
term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index
or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term,
a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a
lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over
the lease term.
(millions o f Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Operating - Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset
are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms
and is included in revenue in the consolidated statement of profit or loss due to its operating nature. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue
in the period in which they are earned.
Finance - Group as a lessor
The Group recognises lease receivables at value equal to the net investment in the lease, starting from the date of
commencement of the lease term. Finance income is based on a pattern reflecting a constant periodic rate of return on
the net investment outstanding. Initial direct costs are included in the initial measurement of the lease receivables.
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position
when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net
basis, or to realize the asset and settle the liability simultaneously. The right of set-off must not be contingent on a future
event and must be legally enforceable in all of the following circumstances:
The normal course of business;
The event of default; and
The event of insolvency or bankruptcy of the entity and all of the counterparties.
These conditions are not generally met in master netting agreements, and the related assets and liabilities are presented
gross in the consolidated statement of financial position.
Renegotiated loans
Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve
extending the payment arrangements and the agreement of new loan conditions.
The Group derecognises a financial asset, such as a loan to a customer, when the terms and conditions have been
renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition
gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are
classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be POCI. When assessing
whether or not to derecognise a loan to a customer, amongst others, the Group considers the following factors:
Change in currency of the loan;
Change in counterparty;
If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in
derecognition. Based on the change in cash flows discounted at the original effective interest rate (EIR), the Group
records a modification gain or loss, presented within interest revenue calculated using EIR in the consolidated statement
of profit or loss, to the extent that an impairment loss has not already been recorded.
For modifications not resulting in derecognition, the Group also reassesses whether here has been a significant increase
in credit risk or whether the assets should be classified as credit-impaired. Once an asset has been classified as creditimpaired as the result of modification, it will remain in Stage 3 for a minimum 3-month probation period. In order for
the restructured loan to be reclassified out of Stage 3, regular payments of more than an insignificant amount of principal
or interest have been made during at least half of the probation period in accordance with the modified payment schedule.
(millions of Uzbek Soums)
3.
Sum m ary o f accounting policies (continued)
Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognised where:
The rights to receive cash flows from the asset have expired;
The Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash
flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under
a “pass-through” arrangement; and
The Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of
the asset.
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to
the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount
of consideration that the Group could be required to repay.
Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or
similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of
the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cashsettled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement
is limited to the lower of the fair value of the transferred asset and the option exercise price.
W rite-off
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery.
If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition
to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit
loss expense. A write-off constitutes a derecognition event.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in profit or loss.
Taxation
The current income tax expense is calculated in accordance with the regulations of the Republic of Uzbekistan.
Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred
income taxes are provided for all temporary differences arising between the tax bases of assets and liabilities and their
carrying values for financial reporting purposes, except where the deferred income tax arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss.
A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences can be utilized. Deferred tax assets and liabilities are measured at tax rates that
are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been
enacted or substantively enacted at the reporting date.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint
ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that
the temporary difference will not reverse in the foreseeable future.
(millions o f Uzbek Soums)
3.
Sum m ary o f accounting policies (continued)
Property and equipment
Property and equipment are carried at cost, excluding the costs of day-to-day servicing, less accumulated depreciation
and any accumulated impairment. Such cost includes the cost of replacing part of equipment when that cost is incurred
if the recognition criteria are met.
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable.
Depreciation of an asset begins when it is available for use. Depreciation is calculated on a straight-line basis over
the following estimated useful lives:
Years
Buildings and premises
Furniture and fixtures
Vehicles
Motor vehicles
25-30
2-5
4
4
The asset’s residual values, useful lives and methods are reviewed, and adjusted as appropriate, at each financial yearend.
Costs related to repairs and renewals are charged when incurred and included in other operating expenses, unless they
qualify for capitalization.
Intangible assets
Intangible assets with finite useful lives (5 years) that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognised on a straight-line basis over their useful
lives. The useful life and amortization method are reviewed at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset, and are recognised in profit or loss when the asset is derecognised.
Assets classified as held for sale
The Group classifies a non-current asset (or a disposal group) as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. For this to be the case, the non-current asset
(or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such assets (or disposal groups) and its sale must be highly probable.
The sale qualifies as highly probable if the Group’s management is committed to a plan to sell the non-current asset
(or disposal group) and an active program to locate a buyer and complete the plan must have been initiated. Further,
the non-current asset (or disposal group) must have been actively marketed for a sale at price that is reasonable in
relation to its current fair value and in addition the sale should be expected to qualify for recognition as a completed sale
within one year from the date of classification of the non-current asset (or disposal group) as held for sale.
The Group measures an asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair
value less costs to sell. The Group recognises an impairment loss for any initial or subsequent write-down of the asset
(or disposal group) to fair value less costs to sell if events or changes in circumstance indicate that their carrying amount
may be impaired.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate of the amount of obligation can be made.
(millions o f Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Retirement and other employee benefit obligations
The Group does not have any pension arrangements separate from the State pension system of the Republic of
Uzbekistan, which requires current contributions by the employer calculated as a percentage of current gross salary
payments; such expense is charged in the period the related salaries are earned. In addition, the Group has no significant
post-employment benefits.
Share capital
Share capital
Share capital represents contributions made by the Fund for Reconstruction and Development of the Republic of
Uzbekistan and the Ministry of Finance of the Republic of Uzbekistan.
Contingencies
Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed unless
the possibility of any outflow in settlement is remote. A contingent asset is not recognised in the consolidated statement
of financial position but disclosed when an inflow of economic benefits is probable.
Recognition of income and expenses
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Interest and sim ilar revenue and expense
The Group calculates interest revenue on debt financial assets measured at amortised cost or at FVOCI by applying
the EIR to the gross carrying amount of financial assets other than credit-impaired assets. EIR is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter
period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into
account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or
incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but
not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its
estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest
rate and the change in carrying amount is recorded as interest revenue or expense.
When a financial asset becomes credit-impaired, the Group calculates interest revenue by applying the effective interest
rate to the net amortised cost of the financial asset. If the financial assets cures and is no longer credit-impaired,
the Group reverts to calculating interest revenue on a gross basis.
For purchased or originated credit-impaired (POCI) financial assets, the Group calculates interest revenue by calculating
the credit-adjusted EIR and applying that rate to the amortised cost of the asset. The credit-adjusted EIR is the interest
rate that, at original recognition, discounts the estimated future cash flows (including credit losses) to the amortised cost
of the POCI assets.
Interest revenue on all financial assets at FVPL is recognised using the contractual interest rate in “Other interest
revenue” in the consolidated statement of profit or loss.
Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income
can be divided into the following two categories:
Fee income earned from sen/ices that are provided o ver a certain penod o f time
Fees earned for the provision of services over a period of time are accrued over that period as respective performance
obligations are satisfied. Loan commitment fees for loans that are likely to be drawn down and other credit related fees
are deferred (together with any incremental costs) and recognised as an adjustment to the effective interest rate on
the loan.
(millions of Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Recognition of income and expenses (continued)
Fee income from providing transaction sen/ices
Fees arising from negotiating or participating in the negotiation of a transaction for a third party - such as where
the Group’s performance obligation is the arrangement of the acquisition of shares or other securities or the purchase or
sale of businesses - are recognised on completion of the underlying transaction. Fees or components of fees that are
linked to certain performance obligations are recognised after fulfilling the corresponding criteria. When the contract
provides for a variable consideration, fee and commission income is only recognised to the extent that it is probable that
a significant reversal in the amount of cumulative revenue recognised will not occur until the uncertainty associated with
the variable consideration is subsequently resolved.
Dividend income
Revenue is recognised when the Group’s right to receive the payment is established.
Foreign currency translation
Soums are the presentation currency of the Group and functional currency of the Bank and its subsidiaries. Transactions
in foreign currencies are initially recorded in the functional currency, converted at the rate of exchange ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the reporting date. Gains and losses resulting from the translation of foreign currency
transactions are recognised in the consolidated statement of profit or loss as gains less losses from foreign currencies translation differences. Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Differences between the contractual exchange rate of a transaction in a foreign currency and the CBU exchange rate on
the date of the transaction are included in net gain/(loss) on foreign exchange operations. The official CBU exchange
rates at 31 December 2021 and 31 December 2020, were 10,837.66 and 10,476.92 UZS to 1 USD, 12,224.88 and
12,786.03 to 1 EUR, 147.07 and 153.17 UZS to 1 Ruble respectively.
Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of
the Group’s financial statements are disclosed below. The Group intends to adopt these new and amended standards
and interpretations, if applicable, when they become effective.
IFRS 1 7 Insurance Contracts
in May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for
insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will
replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts
(i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to
certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply.
IFRS 17 introduces new accounting requirements for banking products with insurance features that may affect
the determination of which instruments or which components thereof will be in the scope of IFRS 9 or IFRS 17.
Credit cards and similar products that provide insurance coverage: most issuers of these products will be able to continue
with their existing accounting treatment as a financial instrument under IFRS 9. IFRS 17 excludes from its scope credit
card contracts (and other similar contracts that provide credit or payment arrangements) that meet the definition of an
insurance contract if, and only if, the entity does not reflect an assessment of the insurance risk associated with an
individual customer in setting the price of the contract with that customer.
When the insurance coverage is provided as part of the contractual terms of the credit card, the issuer is required to:
►
Separate the insurance coverage component and apply IFRS 17 to it
►
Apply other applicable standards (such as IFRS 9, IFRS 15 Revenue from Contracts with Customers or IAS 37
Provisions, Contingent Liabilities and Contingent Assets) to the other components.
(millions o f Uzbek Soums)
3.
Sum m ary o f accounting policies (continued)
Loan contracts that meet the definition of insurance but limit the compensation for insured events to the amount otherwise
required to settle the policyholder’s obligation created by the contract: Issuers of such loans - e.g. a loan with waiver on
death - have an option to apply IFRS 9 or IFRS 17. The election would be made at a portfolio level and would be
irrevocable.
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures required. Early
application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17.
The Group is currently in the process of assessing the impact of adopting IFRS 17 on its consolidated financial
statements.
Am endm ents to IAS 1: Classification o f Liabilities as Current o r Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying
liabilities as current or non-current. The amendments clarify:
►
What is meant by a right to defer settlement
►
That a right to defer must exist at the end of the reporting period
►
That classification is unaffected by the likelihood that an entity will exercise its deferral right
►
That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a
liability not impact its classification.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must be applied
retrospectively. The Group is currently assessing the impact the amendments will have on current practice and whether
existing loan agreements may require renegotiation.
Reference to the Conceptual Framework - Am endm ents to IFRS 3
In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework.
The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial
Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018
without significantly changing its requirements.
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or
losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred
separately.
At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected
by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively.
The amendments are not expected to have a material impact on the Bank Group.
Property, P lant and Equipment: Proceeds before Intended Use - Am endm ents to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment— Proceeds before Intended Use, which prohibits entities
deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while
bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items,
in profit or loss.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied
retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest
period presented when the entity first applies the amendment.
The amendments are not expected to have a material impact on the Group.
(millions o f Uzbek Soums)
3.
Sum m ary of accounting policies (continued)
Onerous Contracts - Costs o f Fulfilling a Contract - Am endm ents to IAS 37
In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing
whether a contract is onerous or loss-making.
The amendments apply a “directly related cost approach” . The costs that relate directly to a contract to provide goods or
services include both incremental costs and an allocation of costs directly related to contract activities. General and
administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the
counterparty under the contract.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Group will apply
these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting
period in which it first applies the amendments.
IFRS 9 Financial Instruments - Fees in the ’10 p e r cent’ test fo r derecognition o f financial liabilities
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment to IFRS 9.
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the original financial liability. These fees include only those paid or
received between the borrower and the lender, including fees paid or received by either the borrower or lender on the
other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the
beginning of the annual reporting period in which the entity first applies the amendment.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption
permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the
beginning of the annual reporting period in which the entity first applies the amendment.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption
permitted.
Definition o f Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’.
The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies
and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting
estimates.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes
in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier
application is permitted as long as this fact is disclosed.
The amendments are not expected to have a material impact on the Group.
Disclosure o f Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements,
in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures.
The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the
requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’
accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about
accounting policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023 with earlier application
permitted. Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the
definition of material to accounting policy information, an effective date for these amendments is not necessary.
The Group is currently assessing the impact of the amendments to determine the impact they will have on the Group’s
accounting policy disclosures.
(millions of Uzbek Soums)
4.
S ignificant accounting judgm ents and estim ates
Estimation uncertainty
In the process of applying the Group’s accounting policies, management has used its judgments and made estimates in
determining the amounts recognised in the consolidated financial statements. The most significant use of judgments and
estimates are as follows:
Im pairm ent losses on financial assets
The measurement of impairment losses across all categories of financial assets requires judgement, in particular,
the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses
and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes
in which can result in different levels of allowances. In addition, large-scale business disruptions may give rise to liquidity
issues for some entities and consumers. Deterioration in credit quality of loan portfolios (amongst other items) as a result
of theCOVID-19 pandemic may have a significant impact on the Group’s ECL measurement. The Group’s ECL
calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable
inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and
estimates include:
The Group’s internal credit grading model, which assigns PDs to the individual grades;
The Group’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial
assets should be measured on a LTECL basis and the qualitative assessment;
The segmentation of financial assets when their ECL is assessed on a collective basis;
Development of ECL models, including the various formulae and the choice of inputs;
Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels
and collateral values, and the effect on PDs, EADs and LGDs;
Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs
into the ECL models.
Preferential lending program s and related borrowings
The Group obtains long term financing from government, state and international financial institutions at interest rates at
which such institutions ordinarily lend in emerging markets and which may be lower than rates at which the Group could
source the funds from local lenders. As a result of this financing, the Group is able to advance funds to specific customers
at advantageous rates. Management has considered whether gains or losses should arise on initial recognition of these
instruments and its judgment is that these funds and the related lending are at the market rates and no initial recognition
gains or losses should arise. In making this judgment management also considered that these instruments are a separate
market sector.
Recoverability o f deferred tax assets
The carrying value of deferred tax assets amounted to UZS 781,966 and UZS 445,549 as at 31 December 2021 and
2020, respectively. The Group believes no valuation allowance against deferred tax assets at the reporting date is
necessary since the deferred tax assets shall be fully realized due to expected profitability of the Group in the future. This
is based on the management’s analysis of 2022 forecast financial results and the Group’s development strategy for near
future.
(m illio n s o f U z b e k S o u m s)
5.
R estatem ent and reclassifications
Voluntary change in accounting policy
1.
Property and equipment
In 2021, the Group changed its accounting policy with respect to the buildings. The Group now applies the cost model,
where assets are carried at cost less accumulated depreciation and any accumulated impairment. Prior to this change in
policy, the Group applied the revaluation model, where the buildings were carried at the fair value at the date of the
revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The Group
believes that cost model provides reliable and more relevant information for the users since it enhances comparability as
cost model is a market practice across banking industry. The change of accounting policy has been accounted for
retrospectively.
The voluntary change resulted in decrease of property and equipment as at 31 December and 1 January 2020 by
UZS 320,099 and UZS 338,847, respectively, increase in deferred tax asset as at 31 December 2020 and 1 January 2020
by UZS 64,020 and UZS 67,769, respectively, as well as decrease in personnel and other operating expenses and
increase in income tax expense for the year ended 31 December 2020 by UZS 18,748 and UZS 3,749, respectively.
2.
Preferred lending programs
The Group participates in a number of preferred lending programs, whereby the Group issued low-interest loans to certain
pre-determined categories of customers funded by equally preferential liabilities provided by the Government and the
CBU and their various controlled entities and agencies, presented within Other borrowed funds in the Group’s
consolidated statement of financial position. The Group earns market interest margin on these programs. In consolidated
financial statements for they ended 31 December 2020, the Group considered that the loans issued and other borrowed
funds related to those programs, amounting, respectively, to UZS 3,920,860 and UZS 1,238,461 as at 31 December
2020 (1 January 2020: UZS 2,532,886 and UZS 1,306,742, respectively), were issued and obtained at below market
rates. The Group recognised USZ 131,309 loss on initial recognition in profit or loss for 2020 in respect of those
instruments originated in 2020.
In 2021 the Group changed its accounting policy regarding preferred lending programs and concluded that those
preferred lending programs constitute a principal market for the recognition of fair value at initial measurement, and,
accordingly, that the interest rates on the programs’ loans issued and other borrowed funds were market ones and no
gains or losses at initial recognition should have been recognised. The change of accounting policy has been accounted
for retrospectively. Hence, the Group determined that loans to customers and other borrowed funds should be increased
by USZ 781,871 and UZS 625,003, respectively, as at 31 December 2020 (1 January 2020: by UZS 879,100 and UZS
842,908). Respective interest income and interest expense for the year ended 31 December 2020 should be decreased
by UZS 204,847 and USZ 185,195, respectively, while loss at initial recognition of financial instruments should be
decreased by USZ 78,388.
Correction of errors
Subsequent to the issuance of the Group’s consolidated financial statements for the year ended 31 December 2020 the
management noted number of errors related to 2020 and earlier periods.
In accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” the correction of errors
was done retrospectively. As a result, in the Group’s consolidated financial statements as at and for the year ended
31 December 2021 comparative financial information as at and for the year ended 31 December 2020 and as at
1 January 2020 was restated to reflect the correction of errors’ effect. The nature of the restatements is summarized
below.
3.
Expected credit losses on Loans to customers
The Group identified certain clerical measurement errors in application of its IFRS methodology for measuring expected
credit loss (ECL) in consolidated financial statements as at and for the years ended 31 December 2020 and as of
1 January 2020. This correction resulted in an increase in credit loss for the year ended 31 December 2020 by
USZ 1,254,601, and decrease in carrying value of loans to customers as at 31 December 2020 and 1 January 2020 by
UZS 1,877,153 and UZS 673,607, respectively.
4.
Other corrections
In addition to the individually material corrections of errors described above, the Group made other minor retrospective
corrections to the comparative financial information as at 31 December 2020, 1 January 2020 and for the year ended
31 December 2020.
The aggregate tax effect in respect of the corrections of errors resulted in an increase of deferred tax assets by
UZS 375,677 and UZS 126,735 as of 31 December 2020 and 1 January 2020 and increase in income tax benefit by
UZS 248,943 in profit or loss for the year ended 31 December 2020.
(millions of Uzbek Soums)
5.
R estatem ent and reclassifications (continued)
Reclassifications
As of 31 December 2020 and 1 January 2020, the Group presented subordinated loans received from the Ministry of
Finance in the amount of UZS 249,925 and UZS 248,477, respectively, within Other borrowed funds in consolidated
statement of financial position. In 2021, the management decided to present them as a separate line item due to the
materiality of the amounts. As a result, comparative statements of financial position as at 31 December 2020 and
1 January 2020 were also reclassified for comparability with the current period presentation.
As of 31 December 2020, the Group presented short-term liabilities under reverse repurchase transactions with the CBU
in the amount of UZS 159,500 within Other borrowed funds in consolidated statement of financial position. In 2021, the
management decided to present them within Amounts due to credit institutions. As a result, comparative statements of
financial position as at 31 December 2020 and 1 January 2020 was reclassified for comparability with the current period
presentation.
The aggregate effect of adjustments and reclassifications to the consolidated statement of financial position as at
1 January 2020 was as follows:
Voluntary
change in
Correction of Reclassifica­
Ref. to As previously accounting
As restated
errors
tions
Note 5
reported
policy
Assets
(673,607)
11,509,149
879,100
2,3
11,303,656
Loans to customers
562,627
901,474
(338,847)
1
Property and equipment
222,013
126,735
34,747
60,531
Deferred income tax assets 1,2,3,4
16,562,920
600,784
(546,872)
16,509,008
Total assets
Liabilities
Amounts due to credit
institutions
Other borrowed funds
Subordinated loans
Other liabilities
Total liabilities
Equity
Share capital
Accumulated deficit
Total equity
Total equity and liabilities
(53,499)
834,055
2
780,556
(248,477)
248,477
2,819,968
842,908
255,843
12,337,868
842,908
(11,505)
(65,004)
4,234,434
(63,449)
4,171,140
(3,522)
(478,346)
(481,868)
-
(242,124)
(242,124)
16,509,008
600,784
(546,872)
-
-
-
3,414,399
248,477
244,338
13,115,772
4,230,912
(783,919)
3,447,148
16,562,920
(m illio n s o f U z b e k S o u m s )
5.
R estatem ent and reclassifications (continued)
The aggregate effect of adjustments and reclassifications to the consolidated statement of financial position as at
31 December 2020 was as follows:
Voluntary
change in
Correction of Reclassifica­
Ref. to As previously accounting
As restated
errors
tions
policy
Note 5
reported
Assets
Cash and cash equivalents
Amounts due from credit
institutions
Loans to customers
Investment securities
Non-current assets held for
sale
Property and equipment
Deferred income tax assets
Other assets
Total assets
Liabilities
Amounts due to credit
institutions
Amounts due to customers
Other borrowed funds
Current income tax liabilities
Subordinated loans
Other liabilities
Total liabilities
Equity
Share capital
Retained earnings/
(Accumulated deficit)
Other reserves
Total equity
Total equity and liabilities
2,3
2,784,262
14,650
2,798,912
2,781,358
8,854
2,790,212
(1,877,153)
18,830
17,024,855
414,518
18,120,137
395,688
781,871
(25,023)
25,023
1
1,2,3,4
1,051,371
37,226
300,652
25,497,450
(320,099)
32,646
494,418
1,390,685
2
11,057,947
8,037,893
-
375,677
(147,633)
(1,631,798)
-
731,272
445,549
153,019
24,360,070
(14,818)
159,500
1,535,367
(58,645)
(409,425)
625,003
7,104
249,925
264,186
20,875,771
625,003
(119,497)
(185,856)
(3,522)
4,234,434
-
-
10,999,302
8,253,471
7,104
249,925
144,689
21,314,918
4,230,912
(1,185,760)
386,410
(130,585)
(1,441,585)
835
4,621,679
(130,585)
(835)
(1,445,942)
-
25,497,450
494,418
(1,631,798)
-
3,045,152
24,360,070
(millions of Uzbek Soums)
5.
R estatem ent and reclassifications (continued)
The aggregate effect of adjustments and reclassifications to the consolidated statement of profit or loss the year ended
31 December 2020 was as follows:
Voluntary
change in
Correction of
accounting
Ref. to As previously
As restated
error
reported
policy
Note 5
Interest income
Interest expense
Net interest income
2
2
Credit loss expense
Initial recognition adjustment on
interest bearing assets
Net interest income after credit loss
expense and initial recognition of
financial instruments
3
2
Fee and commission income
Fee and commission expense
Net gains./(losses) from foreign
currencies:
Dividend income
Other income
Other impairment and provisions
Income received from insurance
activities
Personnel and other operating
expenses
Net non-interest expense
Profit / (loss) before income tax
expense
Income tax (expense) / benefit
Profit / (loss) for the year
1,2,3,
4
3,122,079
(1,609,253)
1,512,826
(204,847)
185,195
(19,652)
.
-
2,917,232
(1,424,058)
1,493,174
(391,066)
61,937
(1,254,601)
(1,583,730)
(131,309)
78,338
-
(52,921)
990,451
120,673
(1,254,601)
(143,477)
818,725
(258,274)
-
(10,878)
406
807,847
(257,868)
(36,094)
-
776
(35,318)
1,697
80,899
(19,052)
-
-
(232)
14,773
15,490
1,465
95,672
(3,562)
11,665
-
3,964
15,629
(1,107,106)
18,748
17,153
(1,071,205)
(527,709)
18,748
41,452
(467,509)
462,742
139,421
(1,213,149)
(610,986)
(12,069)
(27,884)
248,943
208,990
450,673
111,537
(964,206)
(401,996)
-
Notes to the consolidated financial statements were amended accordingly for the effects of adjustments and
reclassifications described above. The adjustments and reclassifications did not have an impact on consolidated
statement of cash flows for the year ended 31 December 2020.
(m illio n s o f U z b e k S o u m s)
6.
Cash and cash equivalents
Cash and cash equivalents comprise:
2021
Cash on hand
1,187,182
1,618,322
572,299
538,074
194,152
992,231
(25,009)
(5,793)
2,272,546
2,798,912
Current accounts with other credit institutions
Current accounts with the Central Bank
Less - allowance for ECL
Cash and cash equivalents
2020
As at 31 December 2021 and 2020 all balances of cash and cash equivalents are allocated to Stage 1. An analysis of
changes in the ECL allowance during the years ended 31 December is, as follows:
2021
At 1 January
Changes in ECL
At 31 December
2020
5,793
1,507
19,216
4,286
25,009
5,793
Am ounts due from credit institutions
Amounts due from credit institutions comprise:
2021
2020
Term deposits for more than 90 days
1,738,354
2,814,982
Obligatory reserve with the CBU
38,108
1,776,462
12,106
2,827,088
(36,083)
(36,876)
1,740,379
2,790,212
Less - allowance for ECL
Amounts due from credit institutions
Credit institutions are required to maintain a non-interest earning cash deposit (obligatory reserve) with the CBU,
the amount of which depends on the level of funds attracted by the credit institution. The Bank’s ability to withdraw such
deposit is significantly restricted by the statutory legislation.
As at 31 December 2021 and 2020 all balances of amounts due from credit institutions are allocated to Stage 1. An
analysis of changes in gross carrying value and corresponding ECL allowance on amounts due from credit institutions
during the years ended 31 December is as follows:
2021
Gross carrying value as at 1 January
New assets originated or purchased
Assets repaid
Foreign exchange adjustments
At 31 December
2,827,088
2,203,363
(3,257,121)
3,132
1,776,462
2020
2,441,376
3,007,734
(2,621,271)
(751)
2,827,083
(m illio n s o f U z b e k S o u m s)
7.
A m ounts due from credit institutions (continued)
2021
ECL allowance as at 1 January
New assets originated or purchased
Assets repaid
Foreign exchange adjustments
At 31 December
2020
36,876
4,043
(4,842)
6
34,700
6,504
(4,332)
4
36,083
36,876
Loans to custom ers
Loans to customers comprise:
2021
Corporate lending
Private companies
State companies
Total corporate lending
2020 (restated)
12,086,104
968,207
13,054,311
11,822,569
1,020,980
12,843,549
5,792,595
1,672,947
195,677
63,001
7,724,220
4,954,711
1,424,264
399,322
25,253
6,803,550
Gross loans to customers
20,778,531
19,647,099
Less - allowance for ECL
Loans to customers
(3,985,397)
16,793,134
(2,622,244)
17,024,855
Loans to individuals
Consumer loans
Mortgage loans
Car loans
Education loans
Total loans to individuals
(millions of Uzbek Soums)
8.
Loans to custom ers (continued)
Allowance for impairment of loans to customers at amortised cost
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to state companies
during the year ended 31 December 2021 is as follows:
State companies
Gross carrying value as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Amounts written off
Foreign exchange adjustments
At 31 December 2021
State companies
ECL as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
Write-offs
Foreign exchange adjustments
At 31 December 2021
Stage 1
826,134
142,839
(135,989)
58,192
(437)
(320,434)
12,170
582,475
Stage 1
Stage 2
Stage 3
2,867
191,979
(47,564)
(2,111)
123,776
(345)
(20,196)
(56,081)
(123,339)
320,779
(4,084)
51
309,109
76,623
Stage 2
Stage 3
Total
1,020,980
142,839
(203,749)
(4,084)
12,221
968,207
Total
53,467
2,257
(502)
39,586
2,257
(166)
2,996
(54)
(13,870)
535
13,346
(62)
(378)
5,811
(95)
(274)
(2,618)
(5,757)
13,965
(1,231)
10,160
140,781
149,740
(1,485)
(4,084)
3
(5,699)
(4,084)
574
153,877
195,753
(4,214)
571
25,905
15,971
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to private
companies during the year ended 31 December 2021 is as follows:
Private companies
Stage 1
Gross carrying value as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Amounts written off
Foreign exchange adjustments
At 31 December 2021
7,917,056
3,613,297
(1,765,447)
625,667
(1,531,635)
(2,901,308)
1,891,219
2,014,294
(400,789)
(369,206)
1,702,050
(1,044,825)
39,939
5,997,569
2,447
1,780,896
(408,772)
(256,461)
(170,415)
3,946,133
(852,496)
35,356
4,307,639
Private companies
Stage 1
ECL as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
Amounts written off
Foreign exchange adjustments
At 31 December 2021
Stage 2
Stage 2
Stage 3
Stage 3
Total
11,822,569
3,613,297
(2,575,008)
(852,496)
77,742
12,086,104
Total
474,070
395,469
(28,710)
240,459
(101,339)
(363,300)
460,709
1,112,266
2,047,045
395,469
(75,877)
(17,379)
(102,622)
171,880
(234,272)
(29,788)
(137,837)
(70,541)
597,572
(208,313)
140,566
1,463,241
1,395,494
(15,735)
(21,362)
2,031
394,632
1,280
398,800
(95,118)
(852,496)
6,304
1,993,603
(132,215)
(852,496)
9,615
2,787,035
(m illio n s o f U z b e k S o u m s )
8.
Loans to custom ers (continued)
Allowance for impairment of loans to customers at amortised cost (continued)
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to individuals during
the year ended 31 December 2021 is as follows:
Stage 2
Stage 3
Total
Loans to Individuals
Stage 1
Gross carrying value as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Amounts written off
At 31 December 2021
5,001,526
3,712,263
(1,930,844)
315,555
(1,086,813)
(1,410,076)
1,117,992
684,032
(347,788)
(251,780)
1,122,528
(618,460)
4,601,611
1,022,492
(312,421)
(63,775)
(35,715)
2,028,536
(200,540)
2,100,117
Loans to Individuals
Stage 1
ECL as at 1 January 2021
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
Amounts written off
At 31 December 2021
Stage 2
Stage 3
6,803,550
3,712,263
(2,591,053)
(200,540)
7,724,220
Total
151,435
183,081
(18,631)
55,999
(45,487)
(58,079)
133,808
236,489
(8,007)
(34,995)
58,005
(74,262)
(15,831)
(21,004)
(12,518)
132,341
(48,298)
68,481
545,510
565,693
(21,784)
(5,838)
198,236
137,192
2,734
(200,540)
667,181
(24,888)
(200,540)
1,002,609
521,732
183,081
(42,469)
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to state companies
during the year ended 31 December 2020 is as follows:
State companies
Gross carrying value as at 1 January 2020
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Foreign exchange adjustments
At 31 December 2020
State companies
ECL as at 1 January 2020
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
Foreign exchange adjustments
At 31 December 2020
Stage 1
976,947
165,569
(179,210)
442
(3,113)
(187,307)
52,806
826,134
Stage 1
Stage 2
Stage 3
Total
771
4,717
(344)
(442)
3,113
(330)
99
2,867
(375)
Stage 2
156
982,435
165,569
(179,929)
187,637
191,979
Stage 3
52.905
1,020,980
Total
20,164
6,725
(1,117)
43
(68)
(5,375)
(43)
68
(113)
5,488
(34)
465
4,509
4,940
18,239
1,009
39,586
(261)
2
535
17,978
1,011
53,467
3,612
(2)
13,346
23,932
6,725
(1,119)
(millions o f Uzbek Soums)
8.
Loans to custom ers (continued)
Allowance for impairment of loans to customers at amortised cost (continued)
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to private
companies during the year ended 31 December 2020 is as follows:
Private companies
Gross carrying value as at 1 January 2020
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Foreign exchange adjustments
A t 31 December 2020
Private companies
Stage 1
Stage 3
Stage 2
5,575,967
174,733
1,223,989
5,530,785
(786,733)
669,182
(1,816,151)
(1,483,383)
227,389
(72,657)
(51,745)
1,878,759
(75,695)
37,824
(133,522)
(617,437)
(62,608)
1,559,078
44,794
7,917,056
1,891,219
2,014,294
Stage 1
Stage 3
Stage 2
Total
6,974,689
5,530,785
(992,912)
310,007
11,822,569
Total
851,331
357,274
(30,266)
ECL as at 1 January 2020
140,970
31,867
678,494
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
Foreign exchange adjustments
357,274
(5,743)
293,049
(83,008)
(63,754)
(362)
(9,567)
119,921
(12,230)
(24,161)
(283,482)
(36,913)
75,984
(259,534)
324,258
702,453
767,177
75,976
17,949
4,212
2,610
(8,161)
8,052
72,027
28,611
474,070
460,709
1,112,266
2,047,045
A t 31 December 2020
-
An analysis of changes in the gross carrying value and corresponding ECL in relation to loans issued to individuals during
the year ended 31 December 2020 is as follows:
Loans to Individuals
Gross carrying value as at 1 January 2020
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
A t 31 December 2020
Loans to Individuals
ECL as at 1 January 2020
Stage 1
Stage 2
Stage 3
4,219,480
78,286
278,818
3,349,417
(1,017,983)
143,715
(1,104,803)
(588,300)
(59,243)
(31,079)
1,156,317
(26,289)
(45,225)
(112,636)
(51,514)
614,589
5,001,526
1,117,992
684,032
Stage 1
Stage 2
Stage 3
Total
4,576,584
3,349,417
(1,122,451)
6,803,550
Total
149,296
104,701
(8,621)
43,227
6,039
100,030
New assets originated or purchased
Assets repaid
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Impact on period end ECL of exposures
transferred between stages during the period
Net remeasurement of loss allowance
104,701
(2,973)
40,112
(23,682)
(12,140)
(211 )
(2,669)
41,449
(1,863)
(5,437)
(37,443)
(17,767)
14,003
(35,493)
90,289
174,090
37,683
774
9,013
47,470
At 31 December 2020
151,435
133,808
236,489
521,732
228,886
During 2021, the Group recognised loss on initial recognition of loans bearing interest rates lower than market ones in
total amount of UZS 18,967 (2020: UZS 52,921).
(millions o f Uzbek Soums)
8.
Loans to custom ers (continued)
Collateral and other credit enhancements
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines
are implemented regarding the acceptability of types of collateral and valuation parameters.
The main types of collateral obtained are as follows:
For commercial lending, charges over real estate properties, inventory, third party guarantees, vehicles trade receivables
and etc.
For retail lending, mortgages over residential properties, third party guarantees vehicles and etc.
The Group also obtains guarantees from Government of the Republic of Uzbekistan for loans to the government related
entities.
Management monitors the market value of collateral and requests additional collateral in accordance with the underlying
agreement during its review of the adequacy of the allowance for loan impairment.
During the years ended 31 December 2021 and 2020, the Group received financial and non-financial assets by taking
possession of collateral it held as security and calling on guarantees and similar credit enhancements. As at 31 December
2021 and 2020 such assets amounting to UZS 10,578 and UZS 24,804 (See Note 13), respectively, are included in other
assets. The management of the Group expects to dispose these assets within 12 months period through public auctions.
Concentration of loans to customers
As at 31 December 2021, the Group had a concentration of loans in the amount of UZS 2,717,820 due from ten largest
borrowers representing 13% of gross loan portfolio (2020: UZS 2,599,371 or 13%). An allowance of UZS 843,197 (2020:
UZS 343,830) was recognised against these loans.
As at 31 December 2021 and 2020, a significant amount of loans was granted to companies operating in the Republic of
Uzbekistan, which represented a significant geographical concentration in one region.
Loans are made principally within Republic of Uzbekistan in the following industry sectors:
2021
2020
7,724,220
4,713,702
2,279,735
1,612,420
3,877,282
571,172
6,803,550
4,163,323
3,857,982
3,017,187
1,332,528
472,529
Total loans to customers
20,778,531
19,647,099
Less - allowance for ECL
(3,985,397)
(2,622,244)
Loans to customers
16,793,134
17,024,8-55
Individuals
Manufacturing
Service, transport and communication
Trade
Agriculture
Construction
(millions o f Uzbek Soums)
9.
Investm ent securities
Investment securities comprise:
2021
2020
Debt securities at amortised cost
State bonds
Corporate bonds
3,133,271
18,865
(14,175)
(3,415)
3,137,961
404,143
Less - allowance for ECL
Debt securities at amortised cost
381,154
26,404
Equity securities at FVOCI
15,375
10,375
15,375
3,153,336
10,375
414,518
Corporate shares
Equity shares at FVOCI
Investm ent securities
State bonds comprise debt securities issued by the CBU and the Ministry of Finance of the Republic of Uzbekistan with
original maturity up to 2 years.
Equity securities at FVOCI comprise equity investments in:
2021
"Mortgage Refinancing Company of Uzbekistan" JSC
"Ozbekiston pochtasi" JSC
Republican Stock Exchange "Toshkent" JSC
Other
Equity securities at FVOCI
2020
7,000
5,000
2,838
537
7,000
2,838
537
15,375
10,375
As at 31 December 2021 and 2020 all the balances of investments in securities at amortised cost are allocated to Stage
1. An analysis of changes in the gross carrying values and associated ECL during the year is, as follows:
Debt securities at amortised cost
2021
407,558
109,306
5,415,386
(2,670,808)
849,340
(551,088)
3,152,136
407,558
Gross carrying value as at 1 January
New assets originated or purchased
Repaid
At 31 December
Debt securities at amortised cost
2020
2021
2020
ECLs as at 1 January
New assets originated or purchased
Repaid
3,415
42
14,175
(3,415)
3,415
(42)
At 31 December
14,175
3,415
(millions o f Uzbek Soums)
10.
Property and equipm ent and intangible assets
The movements in property and equipment were as follows:
B u ild in g s and
prem ises
Cost
1 January 2020
31 Decem ber 2020
Additions
Transfers
Disposals and write-offs
31 Decem ber 2021
Charge for the year
Disposals and write-offs
11.
Others
Total
353,359
48,688
65,594
(1,456)
120,424
(65,594)
(17,851)
145,830
(3,121)
5,520
(920)
(23,348)
278,975
171,831
496,068
53,288
1,000,162
2,512
51,082
(682)
152,740
(51,082)
505
(1,381)
320,597
-
164,840
(21,473)
(23,536)
331,887
273,489
639,435
52,412
1,297,223
B u ild ing s and
prem ises
Accum ulated depreciation
1 January 2020
F urniture and
equipm ent
134,852
214,815
22
Additions
Transfers
Disposals and write-offs
C onstruction in
progress
(38,988)
(8,567)
717
C onstruction in
p rogress
-
31 Decem ber 2020
(46,838)
-
Charge for the year
Disposals and write-offs
(10,272)
243
-
31 Decem ber 2021
(56,867)
-
F urniture and
equipm ent
Others
751,714
271,796
-
-
Total
(128,919)
(21,180)
(63,312)
2,206
(11,602)
755
(189,087)
(83,481)
3,678
(268,890)
(190,025)
(32,027)
(94,382)
17,396
(11,015)
1,311
(267,011)
(41,731)
(115,669)
18,950
(365,609)
Net book value
31 Decem ber 2020
232,137
171,831
306,043
21,261
731,272
31 Decem ber 2021
275,020
273,489
372,424
10,681
931,614
Taxation
The corporate income tax expense comprises:
2021
Current income tax
Deferred tax credit - origination and
reversal of temporary differences
Income tax benefit
2020
18,475
14,546
(336,417)
(223,536)
(317,942)
(208,990)
The Group measures and records its current income tax payable and its tax bases in its assets and liabilities in
accordance with the tax regulations of the Republic of Uzbekistan, where the Group operates, which may differ from
IFRS.
The Group is subject to certain permanent tax differences due to the non-tax deductibility of certain expenses and certain
income being treated as non-taxable for tax purposes.
(millions o f Uzbek Soums)
11.
Taxation (continued)
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for tax purposes. Temporary differences as at 31 December 2021
and 2020 relate mostly to different methods/timing of income and expense recognition as well as to temporary differences
generated by tax - book bases’ differences for certain assets.
The corporate income tax rate applicable to the majority of the Group’s income comprised 20% for 2021 and 2020,
respectively.
The effective income tax rate differs from the statutory income tax rates. A reconciliation of the income tax expense
based on statutory rates with actual is as follows:
2021
Loss before tax
Statutory tax rate
Theoretical income tax benefit at the statutory rate
2020
(1,595,397)
20 %
(319,079)
(610,986)
20 %
(122,197)
1,137
-
4,096
(90,889)
(317,942)
(208,990)
Non-deductible expenditures
Tax exempt income
Income tax benefit
Tax exempt income includes interest income on government bonds, interest income on the CBU bonds and interest
income on investments made using proceeds from pension funds.
Deferred tax assets and liabilities as of 31 December 2021 and 2020 and their movements for the respective years then
ended comprise:
Tax effect of deductible
temporary differences
Cash and cash equivalents
Amounts due from credit
institutions
Loans to customers
Investment securities
Amounts due to customers
Property and equipment
Other liabilities
Loss carryforward
Deferred tax asset
Tax effect of taxable
temporary differences
Investments in associates and
subsidiaries
Other borrowed funds
Deferred tax liability
Net deferred tax asset
O rigination and reversal
o f tem porary differences
In the
1 January
31 December
statem ent o f
2020
2020
p ro fit o r loss
O rigination and reversal
o f tem porary differences
In the
31
statem ent o f
Decem ber
p ro fit o r loss
2021
3,843
5,002
522
637
1,159
12,666
(5,291)
7,375
(158)
7,217
149,095
287
38,095
11,366
1,500
278,491
396
(38,095)
(4,666)
3,057
427,586
683
(109,745)
2,152
317,841
2,835
-
-
213,531
234,529
1,886
( 1 ,886 )
-
-
-
6,700
4,557
-
(810)
3,290
437,368
5,890
7,847
437,368
448,060
335,940
784,000
(10,368)
12,879
2,511
(477)
2,034
(8,482)
10,993
2,511
(477)
2,034
222,013
223,536
445,549
336,417
781,966
In 2021 the Bank incurred a pre-tax loss of UZS 2 219 310 per its statuary accounts. Tax losses carried forward have no
limitation period for utilization pursuant to the tax legislation of the Republic of Uzbekistan. The Group analyzed projected
financial results, supported by the actual statutory financial results of the Bank for interim period ending as of the date of
these consolidated financial statements release. Based on this analysis, as at 31 December 2021 the Group recognised
deferred tax asset related to tax loss, which the Group believes will be fully utilized during the period subsequent to 31
December 2021.
(millions o f Uzbek Soums)
12.
C redit loss expense and other im pairm ent and provisions
The table below shows the ECL charges on financial instruments recorded in the consolidated statement of profit or loss
for the year ended 31 December 2021:
Note
Cash and cash equivalents
Amounts due from credit institutions
Loans to customers at amortised cost
Debt securities measured at amortised cost
Other financial assets
Loan commitments
Letters of credit
Stage 1
Stage 2
Stage 3
Total
6
19,216
-
7
(793)
(48,920)
10,760
-
-
(44,369)
2,503,373
-
-
-
-
2,074
8
9
13
19
19
-
-
-
-
(793)
2,410,084
10,760
2,074
3,879
2,927
(44,369)
2,505,447
2,448,147
3,879
2,927
(12,931)
Total credit loss expense
19,216
-
The table below shows the ECL charges on financial instruments recorded in the consolidated statement of profit or loss
for the year ended 31 December 2020:
Note
Stage 3
Total
Cash and cash equivalents
6
4,286
-
Amounts due from credit institutions
Loans to customers at amortised cost
Debt securities measured at amortised cost
Other financial assets
Financial guarantees
Loan commitments
7
2,176
441,772
3,373
-
-
554,378
571,913
8
9
13
19
19
Total credit loss expense
13.
Stage 2
Stage 1
4,286
-
-
-
-
-
7,206
(411)
(963)
-
-
-
-
2,176
1,568,063
3,373
7,206
(411)
(963)
450,233
554,378
579,119
1,583,730
O ther assets and liabilities
Other assets comprise:
2021
2020
Other financial assets
Commission receivables
Receivables from employees
Receivables as a result of court proceedings
Other financial assets
Less allowance for impairment of other financial assets
Total other financial assets
26,389
12,355
2,425
1,809
23,072
10,336
602
2,236
42,978
36,246
(12,282)
(10,208)
30,696
26,038
83,557
11,738
10,578
6,556
87,669
7,971
24,804
12,165
112,429
132,609
Other non-financial assets
Prepayments for materials services and PPE
Inventory
Repossessed assets
Other non-financial assets
Total other assets non-financial assets
(4,538)
(5,628)
Total other financial assets
Less allowance for impairment of other financial assets
108,891
127,981
Other assets
138,587
153,019
(millions o f Uzbek Soums)
13.
O ther assets and liabilities (continued)
An analysis of changes in the ECLs for other financial assets for the year ended 31 December 2021 is as follows:
2021
ECL at 1 January 2021
New assets originated or purchased
Repaid
A t 31 Decem ber 2021
2020
10,208
3,002
2,195
( 121 )
7,206
12,282
10,208
-
Other liabilities comprise:
2021
2020
Other financial liabilities
Accounts payable
Payables to employees
14,896
16,968
22,548
13,206
Total other financial liabilities
31,864
35,754
Taxes payable, other than income tax
Lottery obligations
Other
34,928
24,262
4,850
72,806
19,560
8,567
Total other non-financial liabilities
64,040
100,933
Allowance for credit related liabilities and financial guarantees
14,808
8,002
110,712
144,689
Other non-financial liabilities
Other liabilities
14.
A m ounts due to credit institutions
Amounts due to credit institutions comprise:
2021
15.
2020
Term deposits
Correspondent accounts with other banks
Amounts due to the CBU
934,582
11,617
Amounts due to credit institutions
946,199
1,535,367
2021
5,668,641
4,741,512
1,915,725
2020
5,121,057
4,034,278
1,843,967
12,325,878
10,999,302
24,186
245,821
-
1,363,485
12,382
159,500
A m ounts due to custom ers
The amounts due to customers include the following:
Pension savings
Time deposits
Current accounts
Am ounts due to customers
Held as security against letters of credit
According to the Law No./02 dated 12 December 2004 the pension savings of participants of the pension savings plan
are accumulated with the Bank. On a monthly basis, voluntary contributions and contributions withheld by the employers
are transferred to the Bank. The Bank keeps detailed accounting for each participant of the pension plan based on the
agreement between the Bank and each participant.
According to the same Law, the State guarantees each participant of the pension plan the safe-keeping and distribution
of pension savings. The Bank, at the approval of the Ministry of Finance of Uzbekistan and the CBU, accrues interest on
outstanding amount of accumulated pension funds in the amount not less than inflation rate. The interest rate is
determined by the Bank, upon approval of the Ministry of Finance and the CBU, taking into account income received
from investing the pension funds. The type and the amount of investments to be made are determined by the Ministry of
Finance and the CBU.
(millions o f Uzbek Soums)
15.
A m ounts due to custom ers (continued)
As of 31 December, accumulated pension funds were invested into following financial instruments by the Bank:
2020
2021
A m ount
Average interest
A m ount
Average interest
Government securities
2,729,259
14%
102,200
14%
Term deposits
1,490,016
14%
1,932,307
15%
841,545
14%
1,675,660
15%
Loans
Total
5,060,820
3,710,167
At the end of each year, interest accrued in the amount of inflation is capitalized onto pension savings fund. In 2021 and
2020, the Bank capitalized interest in the amount of UZS 515,100 (inflation rate 9,98%) and UZS 516,800 (inflation rate
11,1%) onto pension savings account, respectively. The remaining amount earned is accumulated as a liability and used
to cover the deficit; in case the earned interest is less than the amount calculated at inflation rate. As of 31 December
2021, the accumulated unpaid interest was UZS 22,400 (31 December 2020 - nil).
Once participant of pension savings program becomes eligible for pension payment, the total amount is paid at once or
by monthly instalments at the request of the participant.
As at 31 December 2021, amounts due to customer of UZS 3,704,030 (30%) were due to the ten largest customers
(2020 UZS 2,876,545 (26%).
Amounts due to customers include accounts with the following types of customers:
Individuals
State owned and budgetary organizations
Private enterprises
Other
Am ounts due to customers
2021
7,846,608
3,724,005
681,985
73,280
2020
6,979,924
3,419,346
523,705
76,327
12,325,878
10,999,302
An analysis of customer accounts by economic sector follows:
Individuals
Government social structure
Financial sector
Trading and catering
Manufacturing
Services
Agriculture
Construction
Transport and communication
Other
Amounts due to customers
2021
7,846,608
3,724,005
184,583
140,693
139,260
114,557
51,329
41,648
9,915
73,280
2020
6,979,924
3,419,346
156,268
115,193
113,852
87,334
28,161
19,101
3,796
76,327
12,325,878
10,999,302
(millions o f Uzbek Sou ms)
16.
O ther borrow ed funds
Other borrowed funds consisted of the following:
Ministry of Finance of the Republic of Uzbekistan
Cargill Financial Services International, Inc
Fund for Reconstruction and Development of the Republic of Uzbekistan
Sovcombank
ICBC Standard Bank Pic
Central Bank of the Republic of Uzbekistan
"Yoshiar-Kelajagimiz" Fund
Public Fund for Support of Women and Family
Fund for Support of Farms, Dekhkan Farms and Owners of Household
Lands
ODDO BHF AKTIENGESELLSCHAFT DE
JSC National Bank for Foreign Economic Activity of the Republic of
Uzbekistan
Ministry of Employment and Labor Relations of the Republic of
Uzbekistan
JSC Uzbekistan Mortgage Refinancing Company
Export Promotion Agency under the Ministry of Investment and Foreign
Trade of the Republic of Uzbekistan
2021
3,203,190
1,300,834
1,260,849
419,291
377,510
234,649
207,509
149,850
2020
2,965,815
2,029,550
1,126,751
351,021
309,170
121,171
98,985
100,987
66,338
-
46,011
53,419
20,556
47,898
20,474
-
19,434
Fund for Support of Small Businesses under the Navoi Region Khokimiyat
16,420
Agency for the Development of Viticulture and Wnemaking
TMF Global Services
Eximbank of Russia
Other
11 ,498
Other borrowed funds
48,128
10,509
1,068,743
33,625
34,812
7,501,526
8,253,471
-
Other borrowed funds comprise financing received from different Government agencies and international and local
financial institutions to further finance different programs and for specific purposes.
As at 31 December 2021 and 2020 the balance due to the Ministry of Finance of the Republic of Uzbekistan consisted
of:
Funds under the refinancing program with International Bank of Reconstruction and Development (IBRD)
comprising three loan agreements nominated in US dollars, which had issue dates between 15 January 2016 - 30 June
2018, maturity dates between 15 March 2034 - 15 May 2043 with the principal being repaid semi-annually starting from
15 September 2 01 9-15 September 2023. Funds were attracted for the purpose of developing horticultural and livestock
sectors in the Republic of Uzbekistan.
Financing under the refinancing program with Asian Development Bank (ADB) comprising the loan agreement
nominated in Uzbek soums (one of tranches was issued in US dollars), which was signed on 10 February 2020, maturing
on 15 May 2043 with the principal being repaid semi-annually starting from 2023. Funds were attracted for the project of
livestock value chain development in the Republic of Uzbekistan.
Funds under the refinancing program with International Development Association of World Bank consisting of
three loan agreements nominated in US dollars, which had issue dates between 26 April 2014 - 31 October 2018, maturity
dates between 15 March 2032 - 15 September 2040 with the principal being repaid semi-annually starting from 15
September 2017 -1 5 November 2022. Funds were attracted for developing livestock sector and financing of agricultural
investment projects in the Republic of Uzbekistan, and within the project on adaptation to climate changes and mitigation
of consequences to the Aral Lake.
Resources under the refinancing program with Japan International Cooperation Agency (JICA) comprising the
loan agreement signed on 15 June 2020, maturing on 20 December 2044 - 15 June 2045 with the principal being repaid
semi-annually starting from 2026. Funds were attracted for the development of the project of horticultural value chain in
the Republic of Uzbekistan.
Financing under the refinancing program with International Fund for Agricultural Development is formed in
accordance with three loan agreements nominated in US dollars, which had issue dates between 19 April 2017 - 6
September 2019, maturity dates between 15 May 2035 - 6 September 2044 with the principal being repaid semi-annually
starting from 15 November 2020-15 May 2023. Funds were attracted for the purpose of livestock sector development in
the Republic of Uzbekistan.
(millions o f Uzbek Soums)
16.
O ther borrowed funds (continued)
As at 31 December 2021 the balance due to Cargill Financial Services International, Inc. consisted of several loan
agreements nominated in US dollars and EUR, which were concluded between 29 November 2019 - 7 July 2020, had
maturity dates between 30 June 2022 - 26 June 2023 (31 December 2020: several loan agreements nominated in US
dollars and EUR, which were concluded between 16 July 2 0 1 9 - 7 July 2020, had maturity dates between 26 February
2021 -2 6 June 2023). Funds were attracted solely for the purpose of financing export and/or import of goods by particular
clients within letter of credit settlement scheme.
As at 31 December 2021 the balance due to the Fund for Reconstruction and Development of the Republic of Uzbekistan
comprised several loan agreements nominated in Uzbek soums and US dollars, which were concluded between 12
January 2018 -1 2 November 2021, had maturity dates between 15 January 2024 -1 5 April 2028 with the principal being
repaid semi-annually starting from 2021 (31 December 2020: several loan agreements nominated in Uzbek soums and
US dollars, which were concluded between 12 January 2018 - 8 July 2020, had maturity dates between 6 February 2026
- 11 April 2028 with the principal being repaid semi-annually starting from 2021). Funds were attracted within different
state support programs, among which are "Each family is an entrepreneur", provision of microloans to women and young
people, financing projects in Samarkand region.
The Group entered into new loan agreement with Sovcombank for the amount of UZS 418,900 million in April of 2021.
The credit line was provided for corporate-wide objectives of the Group, had maturity in four years.
In May 2021 the Group entered into new loan agreement of UZS 367,543 million with ICBC Standard Bank Pic for the
commercial purposes with maturity in one year.
Long-term financing from the Central Bank of the Republic of Uzbekistan was provided for the corporate-wide and liquidity
management objectives of the Group. As at 31 December 2021 the balance consisted of two loan agreements nominated
in Uzbek soums, signed on 8 July 2019 and 14 September 2020, with maturity dates on 25 September 2023 and on 25
September 2024 with the principal being repaid monthly starting from 2021.
As at 31 December 2021 and 2020 the balance due to "Yoshlar-Kelajagimiz" Fund comprised two loan agreements
nominated in Uzbek soums, signed on10 August 2018 and 28 December 2019, with maturity dates on 31 December
2024 and on 20 February 2025 with the principal being repaid monthly starting from 2019, and with interest rates of
5.00% p.a. and 12.00% p.a. Funds were attracted within the framework of the state project "Yoshlar-Kelajagimiz".
As at 31 December 2021 the balance due to Public Fund for Support of Women and Family consisted of several loan
agreements nominated in Uzbek soums, which were concluded between 15 July 2019 -1 2 April 2021, had maturity dates
between 22 May 2022 - 26 June 2024 with the principal being repaid monthly starting from 2020. (31 December 2020:
several loan agreements nominated in Uzbek soums, which were concluded between 20 November 2018 - 30 October
2020, had maturity dates between 29 November 2021 - 25 July 2023 with the principal being repaid monthly starting from
2019. Funds were attracted for the financing different activities and education of women and families, facing poor social
and financial conditions.
The remaining credit lines also consisted of funds attracted for financing different state support programs and own
commercial objectives of the Group.
17.
S ubordinated loans
Subordinated loans comprise loans from Ministry of Finance of the Republic of Uzbekistan in the total amount of UZS
249,925 which was received in 2017 and 2018 with an interest rate of 3.00% p.a. maturing in 15 years. The loan ranks
after all other creditors’ claims are fully settled in the case of liquidation.
18.
Equity
As at 31 December 2021 and 2020 the number of authorised ordinary shares were 7,433,379,7990 and 4,230,911,952
respectively, with a nominal value per share of UZS 1000. All authorised shares have been issued and fully paid.
In 2021, based on the decision made during the extraordinary shareholders meeting that took place on 29 September
2021, cash contribution received from the Fund for Reconstruction and Development of the Republic of Uzbekistan
(FRDU) in the amount of UZS 2,516,532 and dividends in the amount of UZS 283,983 payable to FRDU and UZS 121,092
payable to Ministry of Finance were capitalized to the share capital of the Group.
According to the Presidential Decree №5041 dated 27 March 2021, the Group’s share capital was increased by UZS
200,000 following a cash contribution made by the Ministry of Finance.
(millions o f Uzbek Soums)
18.
Equity (continued)
According to the Presidential Decree №3694 dated 4 May 2018, the Bank had been granted a relief from payment of all
taxes for the period till 31 December 2020. In 2021, the Bank capitalized accumulated taxes in the amount of UZS 80,861
to the share capital as a contribution of the Ministry of Finance.
The Group’s distributable reserves among shareholders are limited to the amount of its reserves as disclosed in its
statutory accounts. Non-distributable reserves are represented by a reserve fund, which is created as required by the
statutory regulations, in respect of general risks, including future losses and other unforeseen risks or contingencies.
In the consolidated statement of financial position, non-distributable reserves are part of retained earnings.
19.
Com m itm ents and contingencies
Operating environment
Uzbekistan continues economic reforms and development of its legal, tax and regulatory frameworks as required by
a market economy. The future stability of the Uzbekistan economy is largely dependent upon these reforms and
developments and the effectiveness of economic, financial and monetary measures undertaken by the government.
Management of the Group is monitoring developments in the current environment and taking measures it considered
necessary in order to support the sustainability and development of the Group’s business in the current circumstances.
Legal
In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that
the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial
condition or the results of future operations of the Group.
Taxation
Uzbekistan currently has a number of laws related to various taxes imposed by both state and regional governmental
authorities. Implementing regulations are often unclear or non-existent and few precedents have been established. Often,
differing opinions regarding legal interpretation exist both among and within government ministries and organisations
(like the State Tax Committee and its various inspectorates) thus creating uncertainties and areas of conflict. Tax
declarations, together with other legal compliance areas (as examples, customs and currency control matters) are subject
to review and investigation by a number of authorities that are empowered by law to impose extremely severe fines,
penalties and interest charges. These facts create tax risks in Uzbekistan substantially more significant than typically
found in countries with more developed tax systems. Management believes that the Group is in substantial compliance
with the tax laws affecting its operations. However, the risk remains that relevant authorities could take differing positions
with regard to interpretive issues.
As at 31 December 2021 management believes that its interpretation of the relevant legislation is appropriate and that
the Group’s tax, currency and customs positions will be sustained.
In the normal course of business, the Group is a party to financial instruments with off-balance sheet risk in order to meet
the needs of its customers. These instruments, involving varying degrees of credit risk, are not reflected in the
consolidated statement of financial position.
The Group uses the same credit control and management policies in undertaking off-balance sheet commitments as it
does for on-balance operations.
Commitments and contingencies
As of 31 December, the Group’s commitments and contingencies comprised the following:
2020
2021
Credit related commitments
Letters of credit
Undrawn loan commitments
Financial guarantees
31,162
682,196
242,576
465,482
6,519
Commitments and contingencies
713,358
714,577
Provision for ECL for credit related commitments
Deposits held as securities against letters of credit
(14,808)
(millions o f Uzbek Soums)
19.
C om m itm ents and contingencies (continued)
Ail balances of commitments and contingencies are allocated to Stage 1. An analysis of changes in the ECL allowances
during the years ended 31 December is as follows:
Undrawn loan com m itm ents
2020
2021
8,965
8,002
8,002
ECL allowance as at 1 January
New exposures
Amounts paid
11,881
(8 ,002 )
(8,965)
At 31 December
11,881
8,002
Letters o f cred it
2020
2021
_
ECL allowance as at 1 January
New exposures
2,927
At 31 December
2,927
Financial guarantees
-
“
2020
2021
ECL allowance as at 1 January
_
411
Amounts paid
-
(411)
A t 31 December
'
Net interest incom e
Net interest income comprises:
2021
2,932,762
272,964
244,756
2020
2,505,111
359,510
52,611
3,450,482
2,917,232
Amounts due to customers
Other borrowed funds
Amounts due to credit institutions
Debt securities issued
Subordinated loans
(1,239,541)
(681,062)
(127,714)
(11,607)
(7,454)
(993,886)
(332,274)
(77,747)
(12,676)
(7,475)
Interest expense calculated using effective interest rate
(2,067,378)
(1,424,058)
1,383,104
1,493,174
Loans to customers
Amounts due from credit institutions
Investment securities
Interest revenue calculated using effective interest rate
Net interest income
(millions o f Uzbek Soums)
21.
Net fee and com m ission incom e
Net fee and commission income comprises:
2021
22.
2020
446,294
286,753
179,102
70,922
16,316
14,039
12,408
286,264
254,890
165,552
61,421
14,478
7,630
17,614
Fee and commission income
1,025,834
807,847
Agency commission expenses
Settlement operations
Cash collection services
Terminal operations
Securities commissions
Other
313,847
24,255
8,969
1,293
1,068
10,917
205,788
27,278
15,250
1,325
234
7,993
Fee and commission expense
Net fee and commission income
360,349
665,485
____________ 549,979
Agency fee and commission income
Social pension distribution income
Settlement operations
Foreign settlement operations
Terminal operations
Cash operations
Other
257,868
O ther incom e
2021
Lottery income
Gain from a disposal of fixed assets
Fines and penalties
Rental Income
Other
Total other income
2020
84,741
10,128
2,620
537
5,623
69,044
17,166
1,793
657
7,012
103,649
95,672
(millions o f Uzbek Soums)
23.
Personnel and other operating expenses
Personnel and other operating expenses comprise:
2020
2021
Salaries and bonuses
Social security costs
Personnel expenses
Depreciation
Security services
Operating taxes
Office supplies
Repair and maintenance of property and equipment
Charity and sponsorship
Insurance
Marketing and advertising
Utility
Business travel and related
Postage, telephone and fax
Fuel expenses
Occupancy and rent
Legal and consultancy
Representation and entertainment
Other
Other operating expenses
Total operating expenses
24.
760,440
84,696
845,136
670,001
74,178
744,179
9,392
9,232
6,554
4,657
65
34,075
81,545
71,660
39,955
44,143
20,199
8,926
2,647
8,088
11,474
8,129
6,181
6,158
1,132
1,422
2,641
12,726
466,400
1,311,536
327,026
1,071,205
116,397
103,098
49,192
42,255
26,217
17,741
13,916
13,040
10,557
10,012
Risk m anagem ent
Introduction
Risk is inherent in the Group’s activities but it is managed through a process of ongoing identification, measurement and
monitoring, subject to risk limits and other controls. This process of risk management is critical to the Group’s continuing
profitability and each individual within the Group is accountable for the risk exposures relating to his or her
responsibilities. The Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading
and non-trading risks. It is also subject to operating risks.
The independent risk control process does not include business risks such as changes in the environment, technology
and industry. They are monitored through the Group’s strategic planning process.
Risk management structure
The Board of Directors is ultimately responsible for identifying and controlling risks; however, there are separate
independent bodies responsible for managing and monitoring risks.
Board o f Directors
The Board of Directors is responsible for the overall risk management approach and for approving the risk strategies and
principles.
Management Board
The Management Board has the responsibility to monitor the overall risk process within the Group.
Risk Committee
The Risk Committee has the overall responsibility for the development of the risk strategy and implementing principles,
frameworks, policies and limits. It is responsible for the fundamental risk issues and manages and monitors relevant risk
decisions.
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Risk Management
The Risk Management Unit is responsible for implementing and maintaining risk related procedures to ensure an
independent control process.
Bank Treasury
Bank Treasury is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also
primarily responsible for the funding and liquidity risks of the Group.
Internal audit
Risk management processes throughout the Group are audited annually by the internal audit function, that examines
both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit discusses
the results of all assessments with management and reports its findings and recommendations to the Audit Committee.
Risk measurement and reporting systems
The Group’s risks are measured using a method which reflects both the expected loss likely to arise in normal
circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models.
The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment.
The Group also runs worst case scenarios that would arise in the event that extreme events which are unlikely to occur
do, in fact, occur.
Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect
the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept,
with additional emphasis on selected industries. In addition, the Group monitors and measures the overall risk bearing
capacity in relation to the aggregate risk exposure across all risks types and activities.
Information compiled from all the businesses is examined and processed in order to analyze, control and identify early
risks. This information is presented and explained to the Management Board, the Risk Committee, and the head of each
business division. The report includes aggregate credit exposure, credit metric forecasts, hold limit exceptions, , liquidity
ratios and risk profile changes. On a monthly basis detailed reporting of industry, customer and types of products takes
place. Senior management assesses the appropriateness of the allowance for expected credit losses on a recurring
basis.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same
geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be
similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of
the Group’s performance to developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risks, the Group’s policies and procedures include specific guidelines to
focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed
accordingly.
Credit risk
Credit risk is the risk that the Group will incur a loss because its customers, clients or counterparties failed to discharge
their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing
to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in
relation to such limits.
The Group has established a credit quality review process to provide early identification of possible changes in
the creditworthiness of counterparties, including regular collateral revisions. Counterparty limits are established by
the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings which are
described in section “Internal rating scales below” are subject to regular revision. The credit quality review process allows
the Group to assess the potential loss as a result of the risks to which it is exposed and take corrective action.
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Credit-related commitments risks
The Group makes available to its customers guarantees which may require that the Group make payments on their
behalf. Such payments are collected from customers based on the terms of the letter of credit. They expose the Bank to
similar risks to loans and these are mitigated by the same control processes and policies.
Impairment assessment
The Group calculates ECL based on several probability-weighted scenarios to measure the expected cash shortfalls,
discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an
entity in accordance with the contract and the cash flows that the entity expects to receive. The mechanics of the ECL
calculations are outlined below and the key elements are as follows:
PD
The Probability o f Default is an estimate of the likelihood of default over a given time horizon.
A default may only happen at a certain time over the assessed period, if the facility has not been
previously derecognised and is still in the portfolio.
EAD
The Exposure at Default is an estimate of the exposure at a future default date, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and
interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities,
and accrued interest from missed payments.
LGD
The Loss Given Default is an estimate of the loss arising in the case where a default occurs at
a given time. It is based on the difference between the contractual cash flows due and those that
the lender would expect to receive, including from the realisation of any collateral. It is usually
expressed as a percentage of the EAD.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit
loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance
is based on the 12 months’ expected credit loss (12mECL). The 12mECL is the portion of LTECL that represent the ECLs
that result from default events on a financial instrument that are possible within the 12 months after the reporting date.
Both LTECL and 12mECL are calculated on either an individual basis or a collective basis, depending on the nature of
the underlying portfolio of financial instruments.
The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default
occurring over the remaining life of the financial instrument. Based on the above process, the Group groups its loans into
Stage 1, Stage 2, Stage 3 and POCI, as described below:
Stage 1:
When loans are first recognised, the Group recognises an allowance based on 12mECL. Stage 1
loans also include facilities where the credit risk has improved and the loan has been reclassified
from Stage 2.
Stage 2:
When a loan has shown a significant increase in credit risk since origination, the Group records an
allowance for the LTECL. Stage 2 loans also include facilities, where the credit risk has improved
and the loan has been reclassified from Stage 3.
Stage 3:
Loans considered credit-impaired. The Group records an allowance for the LTECL.
POCI:
Purchased or originated credit impaired (POCI) assets are financial assets that are credit impaired
on initial recognition. POCI assets are recorded at fair value at original recognition and interest
revenue is subsequently recognised based on a credit-adjusted EIR. ECL are only recognised or
released to the extent that there is a subsequent change in the lifetime expected credit losses.
Significant increase in credit risk
In order to determine whether an instrument or a portfolio of instruments is subject to 12mECL or LTECL, the Group
assesses whether there has been a significant increase in credit risk since initial recognition. The Group considers an
exposure to have significantly increased in credit risk using following criteria:
►
The principal and/or interest on financial assets are past due for 31-90 days;
►
Restructured loans;
►
External rating decreases for 3 notches.
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
The Group also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset,
such as the account becoming restructured due to credit event. In certain cases, the Bank may also consider that events
explained in “Definition of default’’ section below are a significant increase in credit risk as opposed to a default.
Regardless of the change in credit grades, if contractual payments are more than 30 days past due, the credit risk is
deemed to have increased significantly since initial recognition.
Definition o f default and cure
The Group considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all
cases when the borrower becomes 90 days past due on its contractual payments. The Group considers amounts due
from banks defaulted and takes immediate action when the required intraday payments either interest or principal are
not settled by the close of business as outlined in the individual agreements.
As a part of a qualitative assessment of whether a customer is in default, the Group also considers a variety of instances
that may indicate unlikeliness to pay. When such events occur, the Group carefully considers whether the event should
result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2
is appropriate. Such events may include:
Internal rating of the borrower indicating default or near-default;
The borrower requesting emergency funding from the Group;
The borrower is deceased;
A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of
the collateral;
A material decrease in the borrower’s turnover or the loss of a major customer;
The debtor (or any legal entity within the debtor’s group) filing for bankruptcy;
It is the Group’s policy to consider a financial instrument as ‘cured’ and therefore re-classified out of Stage 3 when none
of the default criteria have been present for at least six consecutive months. The decision whether to classify an asset
as Stage 2 or Stage 1 once cured depends on the updated credit grade, at the time of the cure, and whether this indicates
there has been a significant increase in credit risk compared to initial recognition.
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Internal rating scales
The Group’s applies the following internal ratings scale for loans and advances to customers and other financial assets,
which is primarily based on the statutory regulation on financial assets classification:
Internal rating grade Internal rating grade
D escription
______________________ description____________ ________________________________________________________
1 Standard
High grade
Timely repayment of these loans is not in doubt. The borrower is
a financially stable company, which has an adequate capital
level, high level profitability and sufficient cash flow to meet its
all existing obligations, including present debt. When estimating
the reputation of the borrower such factors as the history of
previous repayments, marketability of collateral (movable and
immovable property guarantee) are taken into consideration.
2 Sub-standard
Standard grade
“Sub-standard” loans are loans, secured with a reliable source
of secondary repayment (guarantee or collateral). On the whole,
the financial situation of borrower is stable, but some
unfavourable circumstances or tendencies are on the present,
which raise doubts on the ability of the borrower to repay on
time. “Standard” loans with insufficient information in the credit
file or missed information on collateral could be also classified
as “substandard” loans.
3 Unsatisfactory
Sub-standard grade
Unsatisfactory loans have obvious deficiencies, which make for
doubtful repayment of the loan on the conditions, envisaged by
the initial agreement. As for “unsatisfactory” loans, the primary
source of repayment is not sufficient and the Group has to seek
additional loan repayment sources, which in case of non­
repayment is a sale of collateral
4 Doubtful
Impaired
Doubtful loans are those loans, which have all the weaknesses
inherent in those classified as “unsatisfactory” with the added
characteristic that the weakness makes collection or liquidation
in full, on the basis of currently existing facts, conditions and
values, highly questionable
5 Uncollectable
Impaired
This classification does not mean that the loans have absolutely
no likelihood of recovery, but rather means that it is not practical
or desirable to defer writing off these essentially worthless
assets even though partial recovery may occur in the future and
the Group should make efforts on liquidation of such debts
through selling collateral or should apply all forces for its
repayment
Financial assets other than loans to customers are graded according to the current credit rating they have been issued
by an internationally regarded agency such as Fitch, Standard & Poor’s and Moody’s.
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
The Group's internal credit rating grades for interbank placements and debt securities measured at amortised cost are
as follows:
International
external rating agency (Fitch)
Internal rating grade________________________________ rating_________________Internal rating description
AA+ to AAA
AA
A+ to АЛABBB+
BBB
BBBBB+
BB- to BB
B- to B+
CCC
CCCD
1
2
3
4.5
High grade
Standard grade
Sub-standard grade
Impaired
Grouping financial assets measured on a collective basis
Dependent on the factors below, the Group calculates ECLs either on a collective or on an individual basis.
Asset classes where the Group calculates ECL on an individual basis include:
►
Stage 3 assets, with exposure greater than 2% of statuary capital.
For other assets classes the Group calculates ECL on a collective basis.
The Group groups these exposures into smaller homogeneous portfolios, based on a combination of internal and external
characteristics of the loans, for example, product type, or borrower's industry.
Forward-looking information and multiple economic scenarios
In its ECL estimation process, the Group relies on a broad range of forward-looking information as economic inputs, such
as:
►
Inflation rates.
►
NPL
The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of
the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary
adjustments when such differences are significantly material.
The table below shows the credit quality by class of asset for loan-related lines in the consolidated statement of financial
position, based on the Group’s credit rating system.
(millions o f Uzbek Sou ms)
24.
Risk m anagem ent (continued)
Credit risk (continued)
31 Decem ber 2021
High
grade
Note
Stage
Cash and cash equivalents,
except for cash on hand
6
Stage 1
Amounts due from credit
institutions
7
Stage 1
Loans to customers at
amortised cost
- State companies
Stage
Stage
Stage
Stage
Stage
Stage
Stage
Stage
Stage
- Private companies
Individuals
Investment financial assets
g
- measured at amortised cost
Undrawn loan commitments
19
Letters of credit
1
2
3
1
2
3
1
2
3
Standard
grade
1,187,782
Cash and cash equivalents,
except for cash on hand
Amounts due from credit
institutions
Loans to customers at
amortised cost
- State companies
1,084,764
2,272,546
1,740,379
1,740,379
390
60,262
155,232
5,267,959
334,978
1,382,096
4,371,060
32,315
885,300
535,491
1,778,545
16,352
1,416,584
556,570
60,652
155,232
5,602,937
1,382,096
2,314,036
4,403,375
885,300
1,432,936
3,137,961
3,137,961
Stage 1
19
Total
Im paired
556,570
Stage 1
682,196
682,196
Stage 1
31,162
31,162
12,842,895
31 Decem ber 2020
Substandard
grade
High
grade
Note
Stage
6
Stage 1
1,618,322
7
Stage 1
-
2,746,859
4,017,016
3,350,361
Standard
grade
Sub­
standard
grade
Im paired
Total
2,798,912
1,180,590
-
22,957,131
2,790,212
-
2,790,212
-
D
Stage
Stage
Stage
Stage
Stage
Stage
Stage
Stage
Stage
- Private companies
- Individuals
1
2
3
1
2
3
1
2
3
786,548
7,442,986
4,850,091
-
2,332
1,430,510
984,184
-
-
178,633
902,028
447,543
786,548
2,332
178,633
7,442,986
1,430,510
902,028
4,850,091
984,184
447,543
-
Investment financial assets
- measured at amortised cost
Financial guarantees
9
Stage 1
-
-
404,143
-
404,143
19
Stage 1
6,519
-
-
-
6,519
Undrawn loan commitments
19
Stage 1
465,482
-
-
-
465,482
Letters of credit
19
Stage 1
242,576
-
-
-
242,576
16,779,599
2,452,869
404,143
1,528,204
21,164,815
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Credit risk (continued)
See Note 8 for more detailed information with respect to the allowance for impairment of loans to customers.
Financial guarantees, letters of credit and loan commitments are assessed and a provision for expected credit losses is
calculated in similar manner as for loans.
The geographical concentration of Group’s financial assets and liabilities is set out below:
2021
R epublic o f
Uzbekistan
CIS and o ther
foreign countries
OECD
Total
Assets
Cash and cash equivalents
Amounts due from credit institutions
Loans to customers
Investment securities
Other financial assets
2,074,461
1,683,183
16,793,134
3,153,336
30,696
12,167
2,029
-
185,918
55,167
-
2,272,546
1,740,379
16,793,134
23,734,810
14,196
241,085
23,990,091
519,432
12,325,878
49,427
5,325,826
249,925
32,770
1,369,127
426,767
946,199
806,573
12,325,878
-
-
249,925
18,503,258
1,369,127
1,233,340
21,105,725
5,231,552
(1,354,931)
(992,255)
2,884,366
3,153,336
30,696
Liabilities
Amounts due to the credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other financial liabilities
Net assets/(liabi!ities)
49,427
7,501,526
32,770
2020
R epublic o f
Uzbekistan
OECD
CIS and other
foreign countries
Total
Assets
2,533,689
2,773,132
17,024,855
414,518
26,038
3,214
13,218
-
262,009
3,862
-
22,772,232
16,432
265,871
2,798,912
2,790,212
17,024,855
414,518
26,038
23,054,535
Amounts due to the credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other financial liabilities
777,810
10,999,302
70,127
5,120,821
249,925
34,919
3,099,025
-
3,099,025
-
3,099,025
-
Net assets/(liabilities)
17,252,904
5,519,328
3,099,025
(3,082,593)
3,099,025
(3,082,593)
3,099,025
(3,082,593)
Cash and cash equivalents
Amounts due from credit institutions
Loans to customers
Investment securities
Other financial assets
Liabilities
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Liquidity risk and funding management
Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal
and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core
deposit base, manages assets with liquidity in mind, and monitors future cash flows and liquidity on a daily regularly. This
incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to
secure additional funding if required.
The Group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an
unforeseen interruption of cash flow. The Group also has committed lines of credit that it can assess to meet liquidity
needs. In addition, the Group maintains a cash deposit (obligatory reserve) with the CBU, the amount of which depends
on the level of customer funds attracted.
Analysis o f financial liabilities by remaining contractual maturities
The tables below summarise the maturity profile of the Group’s financial liabilities at 31 December based on contractual
undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were to be given
immediately. However, the Group expects that many customers will not request repayment on the earliest date the Group
could be required to pay and the table does not reflect the expected cash flows indicated by the Group’s deposit retention
history.
A s a t 31 December 2021
Financial liabilities
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other liabilities
Letters of credit
Undrawn loan commitments
Total undiscounted
financial liabilities
As a t 31 December 2020
Financial liabilities
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other liabilities
Letters of credit
Undrawn loan commitments
Financial guarantees
Total undiscounted
financial liabilities
1 to 3 m onths
Over 5 years
1 to 5
years
3 to 12
m onths
Total
131,104
1,864
31,868
31,162
682,196
47,954
1,801,426
1,554,644
5,591
-
648,065
3,113,480
49,427
3,962,094
29,817
-
331,882
5,512,937
5,764,420
314,621
-
1,195,233
13,367,457
49,427
11,412,262
351,893
31,868
31,162
682,196
3,985,140
3,409,615
7,802,883
11,923,860
27,121,498
167,332
2,939,614
-
1 to 3 m onths
Over 5 years
1 to 5
years
3 to 12
m onths
1,900,677
5,591
-
100,150
2,045,028
69,900
3,622,530
29,817
-
-
-
298,666
4,260,354
5,853,892
322,075
-
4,211,382
5,867,425
10,734,987
870,019
3,726,683
227
410,589
1,864
35,754
242,576
465,482
6,519
423,513
1,881,601
5,759,713
Total
1,692,348
11,913,666
70,127
11,787,688
359,347
35,754
242,576
465,482
6,519
26,573,507
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Liquidity risk and funding management (continued)
The Group’s all commitments and contingencies are considered to be as on demand due to the fact that according to
contractual terms they can be allocated to the earliest period in which they can be called. The Group expects that not all
of the contingent liabilities or commitments will be drawn before expiry of the commitments.
The Group’s capability to repay its liabilities relies on its ability to realise an equivalent amount of assets within the same
period of time.
The Group has received significant funds from Fund for Reconstruction and Development o f the Republic o f Uzbekistan,
Ministry o f Finance o f the Republic o f Uzbekistan, JSC Uzbekistan Mortgage Refinancing of Uzbekistan, Sovcombank,
ICBC Standard Bank Pic, ODDO BHF AKTIENGESELLSCHAFT DE and Export Promotion Agency under the Ministry of
Investment and Foreign Trade o f the Republic o f Uzbekistan. Any significant withdrawal of these funds would have an
adverse impact on the operations of the Group. Management believes that this level of funding will remain with the Group
for the foreseeable future and that in the event of withdrawal of funds, the Group would be given sufficient notice so as
to realize its liquid assets to enable repayment.
The maturity analysis does not reflect the historical stability of current accounts. Their liquidation has historically taken
place over a longer period than indicated in the tables above. These balances are included in amounts due in less than
three months in the tables above.
Market risk
Market risk is that the risk that the Group’s earnings or capital or its ability to meet business objectives will be adversely
affected by changes in the level or volatility of market rates or prices. Market risk covers interest rate risk, currency risk,
credit spreads, and equity prices that the Group is exposed to. There have been no changes as to the way the Group
measures risk or to the risk it is exposed or the manner in which these risks are managed and measured.
The Group is exposed to interest rate risks as it borrows funds at both fixed and floating rates. The risk is managed by
the Group maintaining an appropriate mix between fixed and floating rate borrowings.
The Treasury Department also manages interest rate and market risks by matching the Group’s interest rate position,
which provides the Group with a positive interest margin. The Treasury Department conducts monitoring of the Group’s
current financial performance, estimates the Group’s sensitivity to changes in interest rates and its influence on the
Group’s profitability.
M arket ris k - non-trading
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of
financial instruments. The following table demonstrates the sensitivity to a reasonable possible change in interest rates,
with all other variables held constant, of the Group’s consolidated statement of profit or loss.
The sensitivity of the consolidated statement of profit or loss is the effect of the assumed changes in interest rates on
the net interest income for one year, based on the floating rate non-trading financial assets and financial liabilities held
at 31 December
(millions o f Uzbek Soums)
24.
Risk m anagem ent (continued)
Market risk (continued)
A ssets/Liabilities
Financial assets
Financial liabilities
Increase in
basis p o in t
(LIBOR)
2021
+125
S e n sitivity o f net
interest incom e
Decrease in basis p o in t
S e nsitivity o f net
interest income
2021
-25
2021
(1,603)
3,111
Increase in basis p o in t
S e nsitivity o f net
interest incom e
2020
+100
2020
5,947
(22,708)
Decrease in basis p o in t
S ensitivity o f net
interest incom e
2020
2020
(1,487)
5,677
A ssets/Liabilities
Financial assets
Financial liabilities
Assets/Liabilities
Financial assets
Financial liabilities
A ssets/Liabilities
Financial assets
Financial liabilities
2021
8,016
(15,557)
-25
Currency risk
Currency risk is defined as the risk that the value of a financial instrument will fluctuate due to changes in foreign
exchange rates. The Group is exposed to the effects of fluctuations in the prevailing foreign currency exchange rates on
its financial position and cash flows.
The Treasury Department controls currency risk by managing the open currency position on the estimated basis of
UZS devaluation and other macroeconomic indicators, which gives the Group an opportunity to minimize losses from
significant currency rates fluctuations towards its national currency. The Treasury Department performs daily monitoring
of the Group’s open currency position with the aim to match the requirements of the Central Bank of the Republic of
Uzbekistan.
The Group’s exposure to foreign currency exchange rate risk is presented in the table below:
Other
Currency
EURO
USD
UZS
2021
Financial assets
1,422,565
767,752
71,225
11,004
2,272,546
1,411,330
328,794
255
-
1,740,379
12,570,003
3,153,336
30,623
3,529,184
-
693,947
-
-
18,587,857
4,625,730
765,427
11,004
16,793,134
3,153,336
30,623
23,990,018
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other financial liabilities
409,709
11,239,899
49,427
3,040,532
249,925
32,770
535,503
1,071,788
3,633,043
-
986
13,200
827,951
-
991
-
Total financial liabilities
15,022,262
3,565,595
5,240,334
(614,604)
842,137
(76,710)
992
10,012
Cash and cash equivalents
Amounts due from credit
institutions
Loans to customers
Investment securities
Other financial assets
Total financial assets
Financial liabilities
Open balance sheet position
1
946,199
12,325,878
49,427
7,501,526
249,925
32,770
21,105,725
(m illions o f U zbek Soum s)
24.
Risk m anagem ent (continued)
Market risk (continued)
EURO
USD
UZS
Other
Currency
2020
Financial assets
Cash and cash equivalents
Amounts due from credit
institutions
Loans to customers
Investment securities
Other financial assets
Total financial assets
874,403
1,425,132
483,013
16,364
2,798,912
2,586,234
80,860
123,118
-
2,790,212
12,590,947
414,518
25,911
3,487,851
-
946,057
-
-
16,492,013
4,993,843
1,552,188
16,364
17,024,855
414,518
25,911
23,054,408
631,136
9,573,265
70,127
3,222,750
249,925
34,919
814,649
1,319,867
3,493,413
-
89,582
104,691
1,537,308
-
1,479
-
1,535,367
10,999,302
70,127
8,253,471
249,925
34,919
13,782,122
2,709,891
5,627,929
(634,086)
1,731,581
(179,393)
1,479
14,885
21,143,111
Financial liabilities
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other financial liabilities
Total financial liabilities
Open balance sheet position
The tables below indicate the currencies to which the Group had significant exposure as at 31 December on its monetary
assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the currency rate against
the UZS, with all other variables held constant on the consolidated statement of profit or loss). The effect on equity does
not differ from the effect on the consolidated statement of profit or loss. A negative amount in the table reflects a potential
net reduction in the consolidated statement of profit or loss or equity, while a positive amount reflects a net potential
increase.
UZS depreciation /
appreciation
Currency
USD
EUR
USD
EUR
E ffect on p ro fit Change in currency
rate in %
before tax
Effect on p ro fit
before tax
2021
2021
2020
2020
20 .8 %
20 .2 %
- 20 .8 %
- 2 0 .2 %
(127,838)
(15,495)
127,838
15,495
23.4%
22.4%
-23.4%
-22.4%
(148,392)
(40,184)
148,392
40,184
Operational risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail
to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial
loss. The Group cannot expect to eliminate all operational risks, but a control framework and monitoring and responding
to potential risks could be effective tools to manage the risks. Controls should include effective segregation of duties,
access, authorization and reconciliation procedures, staff education and assessment processes, including the use of
internal audit.
(m illions o f U zbek Soum s)
25.
Fair value m easurem ents
Fair value measurement procedures
The Group does not have material assets or liabilities that require recurring fair value measurement. For non-recurring
fair value measurements the Group can involve external valuers.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
For the purpose of fair value disclosures, the Group’s has determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
A t 31 Decem ber 2021
Level 1
F air value measurem ent
________ using________
Level 2
Level 3
Total
Assets measured at fair value
15,375
Investment securities - equity securities at FVOCI
15,375
Assets for which fair values are disclosed
Cash and cash equivalents
2,272,546
2,272,546
Amounts due from credit institutions
1,732,314
Investment securities measured at amortised cost
3,151,083
Loans to customers
1,732,314
3,151,083
16,748,554
16,748,554
11,656,659
855,033
11,656,659
49,583
7,328,676
248,464
7,328,676
248,464
Liabilities for which fair values are disclosed
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
855,033
49,583
(m illions o f U zbek Soum s)
25.
Fair value m easurem ents (continued)
Fair value hierarchy (continued)
F air value m easurem ent
_________ using_________
Level 3
Level 2
Level 1
A t 31 Decem ber 2020
Total
Assets measured at fair value
10,375
Investment securities - equity securities at FVOCI
10,375
Assets for which fair values are disclosed
2,798,912
2,798,912
Cash and cash equivalents
Amounts due from credit institutions
2,768,718
2,768,718
404,009
Investment securities measured at amortised cost
Loans to customers
16,827,252
404,009
16,827,252
Liabilities for which fair values are disclosed
159,500
- 1,502,764
Amounts due to Central Bank and Government
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
11,028,763
-
233,667
8,132,991
248,462
159,500
1,502,764
11,028,763
233,667
8,132,991
248,462
Fair value of financial assets and liabilities not carried at fair value
Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments that
are not carried at fair value in the consolidated statement of financial position. The table does not include the fair values
of non-financial assets and non-financial liabilities.
2020
2021
Carrying
value
Fair
value
Unrecog­
nised
gain/(loss)
Carrying
value
F air
value
Unrecognised
gain/(loss)
Financial assets
Amounts due from
credit institutions
Loans to customers
Investment securities debt securities at
amortised cost
1,740,379
1,732,314
(8,065)
2,790,212
2,768,718
(21,494)
16,793,134
16,748,554
(44,580)
17,024,855
16,827,252
(197,603)
3,153,336
3,151,083
(2,253)
414,518
404,009
(10,509)
946,199
855,033
91,166
1,535,367
1,502,764
32,603
12,325,878
12,237,460
88,418
10,999,302
11,028,763
(29,461)
49,427
7,501,526
49,583
7,328,676
(156)
172,850
229,627
8,253,471
233,667
8,132,991
(4,039)
120,480
249,925
248,464
1,461
249,925
248,462
1,463
Financial liabilities
Amounts due to credit
institutions
Amounts due to
customers
Debt securities
Other borrowed funds
Subordinated loans
Total unrecognised change
in fair value
298,841
(108,560)
(m illions o f U zbek Soum s)
25.
Fair value m easurem ents (continued)
Valuation techniques and assumptions
The following describes the methodologies and assumptions used to determine fair values for assets and liabilities
recorded at fair value in the financial statements and those items that are not measured at fair value in the consolidated
statement of financial position, but whose fair value is disclosed.
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or having a short-term maturity (less than three months) it is
assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits
and savings accounts without a specific maturity.
Financial assets and financial liabilities earned at amortised cost
Fair value of the quoted notes and bonds is based on price quotations at the reporting date. The fair value of unquoted
instruments, loans to customers, customer deposits, amounts due from credit institutions and amounts due to the CBU
and credit institutions and other financial assets and liabilities, estimated by discounting future cash flows using rates
currently available for debt on similar terms, credit risk and remaining maturities.
(m illions o f U zbek Soum s)
26.
Maturity analysis o f assets and liabilities
The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or
settled. See Note 24 “Risk management” for the Group's contractual undiscounted repayment obligations.
2021
More than one year
Within
one year
Total
2,272,546
Cash and cash equivalents
2,272,546
Amounts due from credit institutions
Loans to customers
Investment securities
Property and equipment
Deferred income tax assets
Other assets
1,209,670
2,978,346
3,153,336
138,587
530,709
13,814,788
931,614
781,966
-
1,740,379
16,793,134
3,153,336
931,614
781,966
138,587
Total
9,752,485
16,059,077
25,811,562
Amounts due to the CBU and Government
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other liabilities
158,468
4,902,126
49,427
1,361,467
110,712
6,582,200
787,731
7,423,752
6,140,059
249,925
14,601,467
946,199
12,325,878
49,427
7,501,526
249,925
110,712
21,183,667
Total
6,582,200
14,601,467
21,183,667
Net
3,170,285
1,457,610
4,627,895
2020
Within
one year
More than one year
Total
2,798,912
Amounts due from credit institutions
Loans to customers
Investment securities
Property and equipment
Deferred income tax assets
Other assets
2,798,912
962,823
2,628,655
414,518
153,019
1,827,389
14,396,200
731,272
445,549
-
Total
6,957,927
17,400,410
Amounts due to credit institutions
Amounts due to customers
Debt securities issued
Other borrowed funds
Subordinated loans
Other liabilities
1,252,821
4,399,721
227
2,236,000
144,689
282,546
6,599,581
69,900
6,017,471
249,925
-
8,033,458
13,219,423
1,535,367
10,999,302
70,127
8,253,471
249,925
144,689
21,252,881
(1,075,531)
4,180,987
3,105,456
Cash and cash equivalents
Total
Net
-
2,790,212
17,024,855
414,518
731,272
445,549
153,019
24,358,337
(m illions o f U zbek Soum s)
27.
Related party disclosures
In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to
control the other party or exercise significant influence over the other party in making financial or operational decisions.
In considering each possible related party relationship, attention is directed to the substance of the relationship, not
merely the legal form.
Related parties may enter into transactions which unrelated parties might not, and transactions between related parties
may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.
Transactions with government-related entities
The Government of the Republic of Uzbekistan, acting through The Fund of Reconstruction and Development of the
Republic of Uzbekistan and The Ministry of Finance of the Republic of Uzbekistan controls over the Group.
The Government of the Republic of Uzbekistan, directly and indirectly controls and has significant influence over a
significant number of entities through its government agencies and other organizations (together referred to as
“government-related entities”). The Group enters into banking transactions with these entities including but not limited to
lending, deposit taking, cash settlement, foreign exchange, providing guarantees, as well as securities transactions.
These transactions comprise a large portion of the Group’s transactions.
Transactions between the Bank and its subsidiaries, which are related parties of the Bank, have been eliminated on
consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are
disclosed below.
(m illions o f U zbek Soum s)
27.
Related party disclosures (continued)
The outstanding balances of related party transactions are as follows:
2021
Shareholders
Cash and cash equivalents
Due from credit institutions
Investment securities
Loans to customers
ECL for loans to customers
Debt securities
Subordinated loans
Customer accounts
Due to credit institutions
Other borrowed funds
Guarantees given
Guarantees obtained
Letters of credit
-
1,137,824
-
249,925
2,934,484
4,691,125
-
-
Government
controlled
entities
968,207
1,593,429
2,015,513
972,829
(173,235)
49,427
634,201
462,601
858,771
5,870,345
-
Key
management
personnel
Total category as per
financial statement Shareholders
caption
2,272,546
1,740,379
85,186
3,153,336
16,722,898
(3,985,397)
49,427
249,925
249,925
2,454,413
12,325,878
946,199
4,291,751
7,501,526
5,870,345
31,162
-
Government
controlled
entities
988,735
2,306,405
329,332
1,149,397
(128,426)
229,627
345,257
492,620
982,063
2020
Key
management
personnel
2,263,591
-
-
Total category as
per financial
statement caption
2,798,912
2,790,212
414,518
16,918,908
(2,622,244)
70,127
249,925
10,999,302
1,535,367
8,253,471
6,519
2,263,591
242,576
-
Total category as
per financial
statement caption
2,505,111
359,510
The income and expense arising from related party transactions are as follows:
Government
controlled
entities
82,919
306,270
52,611
-
52,611
(1,583,730)
(993,886)
(332,274)
(77,747)
(4,790)
(589)
(7,454)
807,847
(257,868)
(1,071,205)
(670,001)
(74,178)
244,756
(305,855)
(359,342)
-
(44,809)
(67,139)
(78,258)
(63,127)
244,756
(2,448,147)
(1,239,541)
(681,062)
(127,714)
(227,124)
(164,546)
-
(104,494)
(31,949)
(49,297)
(15,563)
(7,454)
286,753
(107)
(162,847)
-
(7,454)
1,025,834
(360,349)
(1,311,536)
(760,440)
(84,696)
(7,454)
(1,085)
-
254,890
(598)
(123,089)
-
-
(6,621)
-
-
(3,675)
(474)
2020
Key
management
personnel
Total category as per
financial statement Shareholders
caption
2,932,762
272,964
-
-
Shareholders
Interest income on loans
Interest income on due from credit
institutions
Interest income on investments securities
Impairment charge for loans
Interest expense on deposits
Interest expense on other borrowed funds
Interest expense on due to credit
institutions
Interest expense on subordinated loans
Fee and commission income
Fee and commission expense
Operating expenses
Salaries and other benefits
Social Security Costs
2021
Key
management
personnel
Government
controlled
entities
87,139
225,163
(m illions o f U zbek Soum s)
28.
Subsidiaries
The consolidated financial statements include the following major subsidiaries:
2021
S ubsidiary
Xalq sugurta LLC
UZPAYNETJV LLC
P rincipal
place o f
business
Uzbekistan
Uzbekistan
C ountry o f
incorporation
Uzbekistan
Uzbekistan
P rincipal
place o f
business
Uzbekistan
Uzbekistan
C ountry o f
incorporation
Uzbekistan
Uzbekistan
Date o f
incorporation
2012
2005
O w nership/
voting,
%
100%
100%
Nature o f
activities
Insurance
Payment system
2020
S ubsidiary
Xalq sugurta LLC
UZPAYNET JV LLC
29.
Date o f
incorporation
2012
2005
Ow nership/
voting,
%
100%
100%
Nature o f
activities
Insurance
Payment system
Changes in liabilities arising from financing activities
Debt
securities
issued
Carrying am ount at 31 December 2019
Proceeds from issue
Redemption
Foreign currency translation
Other
Carrying amount at 31 December 2020
Proceeds from issue
Redemption
Foreign currency translation
Other
Carrying am ount at 31 December 2021
Other
borrow ed
funds
Total liab ilities
from financing
activities
Subordinated
loans
3,724,404
3,404,387
5,573,825
(1,152,773)
397,370
30,662
249,891
35
229,627
8,253,471
249,925
8,733,023
340,000
4,058,501
-
4,398,501
(360,700)
-
(4,858,207)
72,258
(24,497)
-
(5,378,407)
72,258
49,427
7,501,526
249,925
7,550,953
70,127
5,053,550
(5,053,600)
-
10,786,925
(6,206,373)
397,370
30,697
(24,497)
The “Other” line includes the effect of accrued but not yet paid interest on bonds issued, other borrowed funds and
subordinated loans. The Group classifies interest paid as cash flows from operating activities.
30.
Capital adequacy
The Group maintains an actively managed capital base to cover risks inherent in the business. The adequacy of
the Group’s capita! is monitored using, among other measures, the ratios established by the Basel Capital Accord 1988
and the ratios established by the CBU in supervising the Group.
During the past year, the Group had complied in full with all its externally imposed capital requirements.
The primary objectives of the Group’s capital management are to ensure that the Group complies with externally imposed
capital requirements and that the Group maintains strong credit ratings and healthy capital ratios in order to support its
business and to maximize shareholders’ value.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximizing the return to stakeholders through the optimization of the debt and equity balance.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings as disclosed in the consolidated statement of changes in equity.
The Management Board reviews the capital structure on a semi-annual basis. As part of this review, the Board considers
the cost of capital and the risks associated with each class of capital. Based on recommendations of the Board, the
(m illions o f U zbek Soum s)
30.
Capital adequacy (continued)
Group balances its overall capital structure through the payment of dividends, new share issues as well as the issue of
new debt or the redemption of existing debt. The Group’s general policy in relation to risks related to capital management
is reflected in the Bank’s Capital Management Policy approved by the Supervisory Board and amended from time to time
based on the Group’s strategic goals and the regulatory requirements of the Central Bank of the Republic of Uzbekistan.
The following table analyses the Group’s regulatory capital resources for capital adequacy purposes in accordance with
the principles employed by the Basel Committee:
Capital adequacy ratio under Basel Capital Accord 1988
The Group’s capital adequacy ratio, computed in accordance with the Basel Capital Accord 1988, with subsequent
amendments including the amendment to incorporate market risks, as of 31 December 2021 and 2020, comprised:
2021
2020
Tier 1 capital
Tier 2 capital
4,565,090
3,045,152
685,283
642,680
Total capital
5,250,373
3,687,832
Risk weighted assets
34,828,651
31,420,418
Risk weighted assets
34,828,651
31,420,418
13%
15%
10 %
12 %
Capital adequacy ratio:
Tier 1 capital ratio
Total capital ratio
31.
Events after the reporting period
New borrowings
On April 14, 2022, the Bank signed a new agreement with Eximbank of Hungary for the amount of EUR 13,312 thousand
(UZS 163,507) with the maturity of 5 years.
Subsidiaries
On 14 April 2022, according to the Decree of the President of Uzbekistan dated 8 April 2022, the Group transferred 100%
share of UZPAYNET JV LLC to the State Assets Management Agency at book value. According to the Presidential
Decree, the share capital was decreased for the same amount.
Sanctions
In February 2022, due to the conflict between the Russian Federation and Ukraine, numerous sanctions were announced
against the Russian Federation by most Western countries. These sanctions are intended to have a negative economic
impact on the Russian Federation. Due to the growth of geopolitical tensions, since February 2022, there has been a
significant increase in volatility in the stock and currency markets, and there are also fears of a significant depreciation
of the Uzbek sum against the US dollar and the euro. As at 15 September 2022, UZS depreciated against USD by 1%
as compared to 31 December 2021.
As of December 31, 2021, the concentration of claims on Russian counterparties, represented by funds in accounts with
financial institutions and securities, amounted to UZS 33,156. The Group considers these events as non-adjusting events
after the reporting period. The management of the Group is monitoring the current changes in the economic and political
situation and taking the necessary measures to maintain the sustainability and development of the Group's business in
the current circumstances. As of the reporting date, the concentration of claims on Russian counterparties, represented
by funds in accounts with financial institutions and securities, amounted to UZS 73,679.
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